With the first quarter of 2021 on the books, the financial data looks powerful. Sophisticated traders can use funds like the Direxion Daily Financial Bull 3X ETF (FAS) to play momentum in the short term.
One of the earnings catalysts has been rising yields, which could help fuel consumer credit products like loans. While interest rates are still at historically low levels, they skyrocketed in the latter part of the first quarter.
FAS seeks daily investment results, before fees and expenses, equal to 300% of the daily performance of the Russell 1000® Financial Services Index. The fund invests at least 80% of its net assets in financial instruments and index securities, index track ETFs and other financial instruments offering daily leveraged exposure to the index or indexes. ETFs that track the index.
The Index is a subset of the Russell 1000® Index which measures the performance of securities classified in the financial services sector of the US large-cap stock market. The fund is up almost 60% since the start of the year.
In addition, the FAS increased by over 300% last year. Since November 24 of last year, the fund has grown by more than 70%.
The day before, November 23, actually marks when the 50-day moving average crossed the 200-day moving average. Since then, the FAS has shown an uptrend with the Relative Strength Index (RSI) still below the overbought level.
Morgan Stanley sees the strength of consumer credit
Global firm Morgan Stanley predicts that consumer credit could be a big winner when earnings results are revealed for the first quarter of 2021. As Empire FX article published in the Nasdaq noted, “Consumer credit is expected to be the star of the first quarter earnings season, which will start hitting the wire the following week, according to analysts at Morgan stanley who expect this to start a fire under the stock.
As a global vaccine continues to unfold, Morgan Stanley views consumer credit names as a game of choice for reopening trade.
“The 1Q21 results will be full of good news. Our best-positioned reopening stocks: Synchrony Financial (SYF), Capital One Financial (COF), Alliance Data Systems (ADS). The quarter should be accompanied by details on improving consumer spending, releasing larger than expected reserves and prospects for increased buybacks. Stock rotation is also a plus for CEIU, ”said Betsy L. Graseck, equity analyst at Morgan Stanley.
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