Best-Performing Leveraged ETF Areas of Last Week

U.S. equities posted gains last week, with the S&P 500 advancing 1.6% and Nasdaq surging 2%, despite a confluence of negative economic data including declining consumer sentiment, August 2025 annual inflation rising to 2.9%, and weaker August job growth of 22,000. Market resilience was primarily driven by increasing expectations for a September Fed rate cut (93.4% probability of 25-bps), robust corporate performance, a strong IPO market, and continued momentum from the AI-fueled tech sector.

Analysis

U.S. equity markets demonstrated notable resilience last week, with the S&P 500 gaining 1.6% and the tech-heavy Nasdaq Composite surging 2.0%, despite a confluence of adverse macroeconomic signals. This divergence was underpinned by strong investor expectations for monetary easing, with the CME FedWatch Tool indicating a 93.4% probability of a 25-basis-point rate cut at the upcoming September Fed meeting. The market's optimism persisted even as August 2025 non-farm payrolls came in significantly below expectations at 22,000 jobs versus a 75,000 forecast, and the annual inflation rate ticked up to 2.9%, its highest level since January. Furthermore, consumer sentiment plunged to its lowest reading since May, with the University of Michigan's index falling 4.8% sequentially. The market's upward momentum was primarily fueled by the technology sector's ongoing AI-driven boom and a robust IPO market, which saw its most active week since November 2021. This was exemplified by significant single-stock movements, such as IonQ (IONQ) gaining over 32% and Micron (MU) rising 20.4%, leading to outsized returns in their corresponding leveraged ETFs.

Key Decisions for Investors

• Investors should recognize the current market's dependence on anticipated Fed rate cuts, which are counteracting weak economic data; any deviation from the expected 25-bp cut could introduce significant market volatility.
• The extreme gains in AI-related stocks and associated leveraged ETFs, such as those tracking IonQ and CoreWeave, suggest high levels of speculation and momentum, warranting a cautious approach to new positions or consideration of profit-taking in highly appreciated names.
• Given the sharp decline in consumer sentiment and weak job growth in consumer-facing sectors, it may be prudent to re-evaluate exposure to cyclical industries while maintaining focus on sectors with strong secular tailwinds, like AI infrastructure and quantum computing, that are currently driving market performance.