Year-End Rally Has Midcaps Leading Among These 3 Leveraged ETFs

In the past month, midcap equity performance has been leading the way given the Direxion Daily Mid Cap Bull 3X Shares (MIDU) year-to-date gain when compared with its small and large cap counterpart funds.

As part of Direxion Investments’ suite of leveraged exchange-traded funds (ETFs), MIDU seeks daily investment results equal to 300% of the daily performance of the S&P MidCap 400 Index. That 3x exposure allows traders to maximize their gains when bullish notions prevail, but seasoned traders are also well aware of the risk associated with this type of leverage when the market goes the other way.

As far as MIDU is concerned, the index it follows measures the performance of 400 mid-sized companies in the United States. It’s up about 20% for the year, ousting the Direxion Daily S&P 500 ® Bull 3X Shares ETF (SPXL)as well as the Direxion Daily Small Cap Bull 3X Shares (TNA).

Nonetheless, traders can still opt for getting large cap exposure via the S&P 500 using SPXL — once again, the triple exposure can maximize gains for traders. For small cap exposure via TNA, it tracks the Russell 2000 Index and seeks daily investment results equal to 300% of the daily performance of the index.

MIDU Chart

MIDU data by YCharts

What’s Ahead for 2023?

Traders already salivating at the opportunities for next year can once again gauge whether inflation will continue to remain the wild card as 2022 winds down. One of the key factors will be whether the U.S. Federal Reserve continues to raise rates, but to the detriment of economic growth — that combination of high interest rates and slow economic growth can provide the breeding ground for stagflation to take place.

“Stagflation is the key risk for the global economy in 2023, according to investors who said hopes of a rally in markets are premature following this year’s brutal selloff,” a Bloomberg report noted.

“Almost half of the 388 respondents to the latest MLIV Pulse survey said a scenario where growth continues to slow while inflation remains elevated will dominate globally next year,” the report added further. “The second most likely outcome is deflationary recession, while an economic recovery with high inflation is seen as least probable.”

Either way, if the market sentiment looks dreary, traders can use Direxion’s inverse products to maximize gains to bearish notions. Of course, this is the advantage of being able to play both sides as opposed to one direction when trading the markets.

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