4 Leveraged ETFs With Double-Digit Gains in July

The S&P 500 and Nasdaq posted strong gains in July, up 2.3% and 3.7% respectively, driven by robust Big Tech earnings, easing trade tensions, rising consumer confidence, and a steady Fed outlook. However, market sentiment reversed sharply at the start of August, with both indices experiencing their worst single-day drops since May, following a disappointing July jobs report and President Trump's announcement of sweeping new tariffs on key trading partners, signaling increased economic uncertainty.

Analysis

The market experienced a significant sentiment reversal between late July and early August. In July, the S&P 500 and Nasdaq posted substantial gains of 2.3% and 3.7% respectively, marking the third and fourth consecutive monthly advance for each index. This rally was broad-based and supported by several key factors: strong Q3 revenue forecasts from technology leaders like Meta Platforms, robust Azure growth at Microsoft, rising consumer confidence as the University of Michigan index hit a five-month high of 61.8, and a steady Federal Reserve policy stance with rates held at 4.25-4.50%. This positive environment fueled double-digit gains in speculative, leveraged ETFs such as DFEN and USD. However, this optimism evaporated at the start of August, with the S&P 500 and Nasdaq suffering their worst single-day declines since May, falling 1.6% and 2.2% respectively. The sell-off was triggered by two distinct macroeconomic shocks: a deeply disappointing July jobs report, which showed only 73,000 jobs added against a 104,000 forecast and an increase in the unemployment rate to 4.2%, and the unexpected announcement of sweeping new tariffs of 15-40% on key trading partners, immediately souring the trade outlook that had improved in July.

Key Decisions for Investors

• Given the sharp increase in volatility and abrupt reversal in market sentiment, investors should exercise extreme caution with high-beta and leveraged instruments, which are designed for short-term trading in clear trending markets.
• Monitor macroeconomic indicators closely, particularly labor market data and geopolitical trade developments, as these have superseded corporate earnings as the primary drivers of market direction and risk.
• It may be prudent to re-evaluate exposure to sectors highly sensitive to international trade and economic growth, as the new tariffs and weak employment data present significant headwinds.
• The weak labor market figures could alter the Federal Reserve's policy outlook, making upcoming inflation data and FOMC communications critical checkpoints for assessing the future path of interest rates.