Direxion Daily Financial Bull 3x Shares

FAS

Market cap $2.52B

While the market's attention has largely concentrated on major headlines such as the blistering technology ecosystem, the Federal Reserve's shifting stance on monetary policy deserves careful consideration. Last month, the central bank cut its benchmark interest rate by 25 basis points, thus delivering a widely expected move that ended a nine-month policy pause.

Direxion Daily Financial Bull 3X Shares ETF (FAS) is rated a Sell due to six major risks facing financial stocks and the economy. FAS's +3x leverage amplifies downside risk, making it especially vulnerable amid recession, inflation, interest rate, bond, housing, and commercial real estate threats. Technical analysis shows FAS underperforming the S&P 500, with negative momentum and flat price action, signaling caution for leveraged exposure.

The call option spread strategy is an excellent way to take advantage of the bullish move in this ETF.

If the CME FedWatch Tool is correct, then there's a 90% chance the U.S. Federal Reserve institutes a rate cut of 25 basis points. It should result in positive moves for a market that's been expecting rate cuts all year, but four sectors in particular should benefit from easing monetary policy.

FAS delivers 3x daily returns of the financial sector, making it suitable only for short-term, tactical trading—not long-term holding. Compounding and daily resets can lead to significant value decay or amplified gains, depending on market direction and holding period. Current financial sector momentum is positive, but inflation and delayed rate cuts pose near-term risks for leveraged strategies like FAS.

The Direxion Daily Financial Bull 3x Shares (FAS 0.78%) exchange-traded fund (ETF) is a leveraged fund that aims to triple the daily performance of the S&P Financial Select Sector index. That index includes 73 of the top financial stocks from the S&P 500, including JPMorgan, Berkshire Hathaway, Visa, Mastercard, Bank of America, and Wells Fargo.

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Leveraged ETFs, like the Direxion Daily Financial Bull 3X ETF, are designed for day trading, not long-term investing, due to their daily reset mechanism. Holding leveraged ETFs beyond a single day can result in losses, even if the underlying index remains flat, due to the compounding effects of leverage. Leveraged ETFs are suitable for traders looking to hedge short-term positions or speculate on market movements, not for building long-term investment portfolios.

Wall Street was moderately upbeat last week.

We highlight a bunch of the best-performing leveraged equity ETFs of January.