It appears the markets shook off last week’s inflation fears as the major indexes saw green in Monday’s trading session. The Direxion Daily S&P 500 High Beta Bull 3X Shares (HIBL) notched a 7% gain and is up 70% for the year.
For traders looking to track the markets in relative lockstep, HIBL is right up their alley. Even more so if they’re looking for leverage.
“Beta is directly related to market movement. Notably, high-beta funds tend to rise or fall more than the stock market and are thus more volatile,” a Zacks article published in Nasdaq noted. “When markets soar, high-beta funds experience larger gains than the broader market counterparts and thus, outpace rivals.”
HIBL seeks daily investment results equal to 300% of the daily performance of the S&P 500® High Beta Index. The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments that track the index and other financial instruments that provide daily leveraged exposure to the index or to ETFs that track the index.
The index provider selects 100 securities to include in the index from the S&P 500® Index that have the highest sensitivity to market movements, or ‘beta’, over the past 12 months as determined by the index provider. The fund is up 99% the past year.
Riding the Rally with ‘HIBL’
Even with the tailwinds of a vaccine rollout, investors might be hesitant to jump back into the markets with a fear that the major indexes might be overheated. However, big banks like J.P. Morgan have recently suggested that investors should “ride the rally” and strike while the iron is hot.
“Wall Street has been in great shape since the fourth quarter of 2020, thanks to the vaccine news,” the Zacks article said. “In fact, the S&P 500 has gained about 75% from its March-low hit due to the outbreak of coronavirus, while the Nasdaq Composite has jumped about 100%. This has sparked overvaluation concerns or bubble fears in many investors’ mind.”
“But the chief investment officer at JPMorgan Asset Management Bob Michele has shrugged off such fears and suggested investors to ‘ride the rally,'” the article added further. “J.P. Morgan is betting on the winning momentum across junk bonds, emerging market debt and risky bank securities, as quoted on Bloomberg. New fiscal stimulus in the Joe Biden Presidency has been encouraging J.P. Morgan toward the same.”
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