Direxion Managing Director Ed Egilinsky spoke to Benzinga about the sectors likely to benefit from the Federal Reserve's potential rate cuts as well as the 2024 presidential election.
"In the current rotation trade environment, there are several sectors that could be impacted such as the Financials, Energy, Tech, and Healthcare/Biotech," Egilinsky said.
Semiconductors – Driving The Tech Sector
Egilinsky emphasized the significant role of semiconductors in the tech sector's recent success.
"The tech sector has continued to be a leader in 2024, with semiconductors once again outpacing the broader tech space," he said. This trend is partly due to the excitement surrounding AI.
For traders looking to leverage this momentum, Egilinsky said, "We have seen inflows YTD with both our Direxion Daily Semiconductor Bull 3x Shares (NYSE:SOXL) and Direxion Daily Semiconductor Bear 3x Shares (NYSE:SOXS), as traders contemplate the next directional move."
These ETFs are designed to capture short-term fluctuations in the semiconductor sector, offering investors tools to capitalize on its ongoing growth.
Sector Sensitivity Amid Political, Economic Shifts
With Election Day on Nov. 5, Egilinsky highlighted how policy changes could affect various sectors in 2025.
"The election outcome could have a major impact on policy and should create directional volatility in areas sensitive to policy shifts such as healthcare/biotech, financials, and energy," he explained.
Leveraged and inverse ETFs are poised to see increased activity depending on these policy changes:
- Direxion Daily S&P Biotech Bull 3X Shares (NYSE:LABU) and Direxion Daily S&P Biotech Bear 3X Shares (NYSE:LABD),
- Direxion Energy Bull 2X Shares (NYSE:ERX) and Direxion Daily Energy Bear 2X Shares (NYSE:ERY)
- Direxion Financial Bull 3X Shares (NYSE:FAS) and Direxion Financial Bear 3X Shares (NYSE:FAZ)
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Diversifying Beyond The Magnificent Seven
Egilinsky also discussed the challenge of diversifying beyond the top-performing Magnificent Seven stocks: Apple Inc. (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), Tesla Inc (NASDAQ:TSLA), and Nvidia Corp (NASDAQ:NVDA).
"We see many investors looking to diversify beyond the Magnificent Seven stocks," he said. For those seeking broader exposure, the Direxion NASDAQ-100 Equal Weighted Index Shares (NASDAQ:QQQE) offers an equal weight approach to the NASDAQ 100 Index, potentially providing additional sources of returns.
Real Estate, Utilities: Benefiting From Rate Cut Expectations
Egilinsky also noted the performance of real estate and utilities in light of anticipated rate cuts.
"The Real Estate and Utilities markets recently hit two-year highs as the realization that the Fed will start cutting interest rates has helped both sectors be amongst the best-performing sectors thus far this quarter," he said.
For investors looking to ride this momentum, ETFs like the Direxion Daily Utilities Bull 3X Shares (NYSE:UTSL) and Direxion Daily Real Estate Bull 3X Shares (NYSE:DRN) are worth considering.
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