ETF Zoo: Leveraged Lunacy Surpasses $65B in Gains
Say what you will about leveraged ETFs, but investors simply can’t get enough of them this year. The ETF Zoo crew digs into the numbers YTD and how investors are making the most out of their safe money to spend it on spicier strategies, as well as checking in on the memory trade, international, and more.
The leveraged frenzy has hit fever pitch, with the ETF category notching substantial gains and equally eyebrow raising losses in the first half. ETF.com hosts Dave Nadig, President & Director of Research, and Sumit Roy, Senior ETF Analyst are joined this week by Eric Balchunas, Senior ETF Analyst at Bloomberg Intelligence, and Tony Dong, CETF, Lead ETF Analyst at ETF Central. The group catches up on flows, including the sizable amount of money going into and out of leveraged ETFs, what’s trending and what’s faded this year, and much more.
ETF inflows recently have been completely swallowed by a flat-to-down market, while the boring stuff keeps winning. Eric Balchunas pointed out that even amid all the buzz around AI and semiconductor plays, nearly $200 billion year-to-date has quietly piled into plain-vanilla giants like VOO, SPY, IVV, and VTI. The flip side of this trade is that nobody's touching commodities, crypto, or private credit as diversifiers anymore, and even factor investing appears to be languishing. Cautious investing is back as investors park their safe money in boring beta and cash (thanks to 4% money-market yields). That said, having secure money tucked away also frees them up to gamble on whatever's hot without panicking when it tanks.
The Roundhill DRAM memory-chip ETF became the poster child for 2026 speculation, breaking iShares Bitcoin ETF IBIT's inflow record before taking a 40% price hit, yet assets barely budged from their $25 billion peak because money kept pouring in anyway. Sumit Roy noted the real debate is whether the memory/AI chip cycle is genuinely different this time or just another boom headed for a bust. Meanwhile, Tony Dong called out the sillier end of the spectrum: a wave of leveraged and inverse single-stock ETFs launched around the SpaceX IPO, one of which cratered nearly 30% in a week. However, despite the wild swings in leveraged strategies, Balchunas makes the case that products like TQQQ have actually generated tens of billions in real investor gains.
The Zoo crew also dug into the longer-term impacts of Trump accounts for kids, with Balchunas predicting wealthy donors will eventually use them to pass down stock tax-free.t. On crypto, Roy and Balchunas agreed the current quiet stretch simply tracks Bitcoin's roughly 50% drawdown but could it also be because true crypto believers are having an identity crisis now that Wall Street and the government have made it mainstream? Rounding things out, the crew was also skeptical of a real rotation into China despite hype around the Kimi AI announcement, given the larger geopolitical framing. And on small caps and international stocks, the consensus was: promising numbers, but nobody's ready to call it a real regime change until large caps tumblee for more than a few months.
