Tariffs, Rate Cuts And Rising Delinquencies; Direxion ETFs Leverage Financial Sector Volatility For Amplified Exposure

By Kyle Anthony, Benzinga

DETROIT, MICHIGAN - June 18, 2025 (NEWMEDIAWIRE) - When traders think of the U.S. financial sector, they often default to banks. But the sector encompasses a far broader range of businesses - including asset managers, insurers, broker-dealers, hedge funds and fintech firms - managing an estimated $79 trillion in assets, according to the November 2024 Financial Stability Report from the Federal Reserve.

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What's Driving The Financial Sector Now?

While broad stability persists, short-term stress signals are flashing. Auto and credit card delinquencies are ticking up, revealing strain in consumer credit markets. This shift could pressure lenders and open trading opportunities in financial stocks exposed to retail credit.

Meanwhile, first-quarter 2025 earnings from the banking sector surprised to the upside. According to the FDIC, net income hit $268.2 billion in 2024 - up 5.6% year-over-year - fueled by lower funding costs and higher non-interest income. However, with deposit betas rising and loan growth slowing, questions remain about how long this resilience will last.

Catalysts Ahead: Policy Shifts, Crypto Moves, And Fed Action

President Trump's second administration continues to shake-up expectations. His aggressive crypto policy pivot, including an executive order to create a federal bitcoin reserve, could trigger volatility not only in digital asset markets but also among financial institutions with crypto exposure, particularly asset managers launching bitcoin ETFs and fintechs with blockchain ties.

Further, Trump's trade tensions with Canada, Mexico, and China are rippling into monetary policy. With tariff threats paused, but not resolved, traders are bracing for June 2025 rate cuts, widely anticipated if inflation data continues to show instability. Any deviation from expected Fed action could jolt interest-rate sensitive financials - banks, insurers and mortgage lenders especially.

Adding fuel to the fire: next quarter's earnings season, bank stress test results and potential regulatory rollbacks could all become key inflection points for short-term traders.

Trade The Trend - Bull Or Bear - With Direxion's Leveraged Financial Sector ETFs

For traders seeking amplified exposure to these fast-moving dynamics, Direxion offers Daily Financial Bull 3X Shares (FAS) and Daily Financial Bear 3X Shares (FAZ). These single-day leveraged ETFs track the Financial Select Sector Index, aiming to magnify gains - or losses - based on directional bets.

FAS allows traders to express a bullish view on U.S. financial stocks with 3X daily leverage.

FAZ offers inverse 3X daily exposure, helping hedge or speculate on potential downside moves.

Whether your trade thesis is driven by tariff whiplash, a surprise from the Federal Reserve, or a crypto-fueled rally in asset managers, these ETFs are purpose-built for active, short-term traders who are closely monitoring market catalysts.  However, it is crucial to approach these leveraged products with a clear understanding of their risks. While the amplified exposure can translate to significant gains, it can also lead to substantial losses. These ETFs are best suited for those who can actively manage the inherent risks of leverage and are looking to capitalize on short-term trends occurring with the sector. It is important to note that these solutions should not be held for more than a day.

Featured image by Tomas Eidsvold on Unsplash.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice

This content was originally published on Benzinga. Read further disclosures here.

An investor should carefully consider a Fund's investment objective, risks, charges, and expenses before investing. A Fund's prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund's prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund's prospectus and summary prospectus should be read carefully before investing.

Leveraged and Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk and who actively manage their investments.

The "Financial Select Sector Index" is a product of S&P Dow Jones Indices LLC ("SPDJI"), and has been licensed for use by Rafferty. Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Rafferty. Rafferty's ETFs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Financial Select Sector Index.

Direxion Shares Risks - An investment in a Fund involves risk, including the possible loss of principal. A Fund is non-diversified and includes risks associated with the Fund's concentrating its investments in a particular industry, sector, or geography which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause prices to fluctuate over time.

Leverage Risk - Each Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund's correlation or inverse correlation with the Index and may increase the volatility of the Fund.

Daily Index Correlation Risk - A number of factors may affect the Bull Fund's ability to achieve a high degree of correlation with the Index and therefore achieve its daily leveraged investment objective. The Bull Fund's exposure to the Index is impacted by the Index's movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.

Daily Inverse Index Correlation Risk - A number of factors may affect the Bear Fund's ability to achieve a high degree of inverse correlation with the Index and therefore achieve its daily inverse leveraged investment objective. The Bear Fund's exposure to the Index is impacted by the Index's movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.

Financials Sector Risk --Performance of companies in the financials sector may be materially impacted by many factors, including but not limited to, government regulations, economic conditions, credit rating downgrades, changes in interest rates and decreased liquidity in credit markets.

Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Other Investment Companies (including ETFs Risk), Cash Transaction Risk, Passive Investment and Index Performance Risk and for the Direxion Daily Financial Bear 3X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.

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