Just as the capital markets were responding to the upside on the heels of the 25-basis point rate cut by the Federal Reserve, U.S. President Donald Trump’s imposition of tariffs sent the markets back down. Oil prices saw their worst performance in four years, but opportunities could be ahead for leveraged, energy-focused exchange-traded funds (ETFs).
The Dow finished 300 points in the red following the rate cut announcement on Wednesday and then went up over 300 at the beginning of the following market session on Thursday. Following the tariff announcement, the Dow effectively erased its gains and fell over 300 points.
The price of oil began by falling below $65 a barrel on Thursday, and fell for the first time in six days. For the markets hoping that future rate cuts could be on the way, Powell dashed their hopes by saying it wasn’t the trend, but merely a “mid-cycle adjustment.”
Trump’s announcement that a 10 percent tariff would be applied to another $300 billion worth of Chinese goods, effective Sept. 1, sent the major indexes on a rollercoaster. If traders want to use this as an opportunity to jump into the energy sector, they need to pick their spots.
“In our opinion, if you’re investing in energy stocks, it’s all about being selective and finding that right entry point, and there’s lots of companies today that are being unfairly punished,” said Mark Tepper, president and CEO of Strategic Wealth Partners. “And, with the pullback today, I would view that as a buying opportunity. ”
Two funds for traders to consider are the Direxion Daily Energy Bull 3X Shares (ERX ) for bullish plays and the Direxion Daily Energy Bear 3X Shares (ERY ) for bearish opportunities to take advantage of.
ERX seeks daily investment results equal to 300 percent of the daily performance of the Energy Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector which includes the following industries: oil, gas and consumable fuels; and energy equipment and services.
On the other hand, ERY seeks daily investment results equal to 300 percent of the inverse of the daily performance of the Energy Select Sector Index. Like ERX, the index ERY tracks is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector which includes the following industries: oil, gas and consumable fuels; and energy equipment and services.
For more relative market trends, visit ETFdb.