Best-Performing Leveraged ETFs of Q3

U.S. equity markets posted strong Q3 2025 gains, with the Russell 2000 advancing 10.9% and the S&P 500 up 6.4%, driven by a robust 3.8% Q2 GDP growth. This occurred amidst mixed economic signals, including a significantly weakening labor market that added only 22,000 jobs in August and rising inflation reaching 2.9%, prompting the Fed's first rate cut of the year. Concurrently, President Trump announced new tariffs, signaling renewed trade tensions, while the AI sector continued its strong investment activity, with leveraged ETFs in quantum computing and AI-related tech leading Q3 performance.

Analysis

The third quarter of 2025 closed with strong U.S. equity market performance, exemplified by a 10.9% gain in the Russell 2000 and a 9.9% advance in the Nasdaq, yet this rally occurred against a backdrop of increasingly divergent and conflicting signals. While economic growth appeared robust, with Q2 GDP being revised upward to 3.8% on strong consumer spending, the labor market showed significant signs of weakness. August job creation of only 22,000 fell drastically short of the 75,000 forecast, prompting the Federal Reserve to enact its first rate cut of the year in September, with markets now pricing a 94.6% probability of a further 50-basis-point cut in October. This dovish policy pivot is complicated by rising inflation, which reached 2.9% in August, and the re-emergence of trade tensions, marked by the announcement of new tariffs ranging from 30% to 100% starting October 1. Concurrently, speculative fervor remains high in specific sectors, with the AI boom continuing unabated as evidenced by NVIDIA's partnerships and CoreWeave's $14 billion deal with Meta. This high-risk appetite is reflected in the quarter's top-performing assets, which were dominated by highly leveraged, single-stock, and niche-sector ETFs targeting quantum computing and technology, such as RGTX, which surged 477.1%.

Key Decisions for Investors

• Investors should recognize the growing divergence between equity market momentum and weakening labor fundamentals; the Fed's dovish turn is a response to economic deterioration, not a signal of underlying strength.
• Given the re-escalation of trade tensions, portfolios should be reviewed for exposure to sectors targeted by the new tariffs, including heavy trucks, pharmaceuticals, and imported home goods.
• While high-momentum themes like AI and quantum computing show significant upside, the leadership of highly leveraged single-name ETFs indicates frothy sentiment, warranting caution and position sizing appropriate for high-volatility assets.
• With inflation accelerating to 2.9% and the Fed embarking on an easing cycle, consider allocating to or increasing positions in inflation hedges, such as gold miners, which have already shown strong leveraged performance.