Inflation fears are certainly driving the Nasdaq-100 into bear market territory with the index down about 30% year-to date, but if the U.S. Federal Reserve can save the markets from free falling, then the Direxion Daily Technology Bull 3X ETF (TECL) could come in handy if a bounce occurs.
The markets appear to be embracing the latest move by the Fed, which was of course to raise the federal funds rate by 75 basis points, making it the largest rate hike since 1994. Of course, the true test will be whether the markets can see a sustained rally rather than the flash rallies that investors have been seeing prior to another move down.
“Today’s announcement confirms the Fed’s commitment to fight the inflation battle more aggressively despite the potential aftermath from raising rates at such a rapid pace,” said Allianz Investment Management’s Charlie Ripley. “Overall, Fed policy rates have been out of sync with the inflation story for some time and the aggressive hikes from the Fed should appease markets for the time being.”
More Aggression Could Help TECL
As mentioned, the tech sector has been one the hardest hit amid inflation fears. At some point, the sector will rally again, and that could be spurred along by a more aggressive Fed to ward off inflation.
“The more aggressive stance can still be consistent with a softish landing for the economy, but the path is getting narrower,” said Barry Gilbert, asset allocation strategist for LPL Financial, according to a CNBC report. “We still think the Fed may be able to back off from its new forecast of a 3.4% benchmark rate at the end of the year, but for now, the priority is showing resolve.”
As for TECL, the fund seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Technology Select Sector Index. The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index includes domestic companies from the technology sector.
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