Stock prices hit new highs in April, and leveraged exchange-traded funds may have added fuel to that fire. As the S&P 500 posted its best monthly performance in more than five years last month, inflows into mutual funds and ETFs remained steady at around $90 billion, according to JPMorgan. However, factoring in $100 billion in rebalancing inflows from leveraged ETFs, net inflows from global equity funds reached a new record $190 billion, the firm added. This popularity may have added momentum to the bull market’s comeback. “The estimated $100 billion in rebalancing flow through leveraged equity ETFs in April was the highest monthly rebalancing flow on record, and since this flow tends to reverberate at the end of the day regardless of price, it certainly acted as a strong amplifying force for the stock market in April,” a team of global market strategists led by Nikolaos Panigirtzoglou wrote in a note this week. Leveraged ETFs aim to increase returns by multiplying the daily performance of the underlying asset. However, these funds can also magnify losses if the asset they are tied to sells off. As the popularity of funds provides a boost, leveraged ETFs can have a negative impact if market conditions deteriorate. Some of the more popular ones we saw last month may not be great for long-term investors due to their high risk, daily rebalances, and high fees. Below are the top 10 leveraged ETFs in April based on average volume over the month, per FactSet.
