The Xchange Blog

Home Builders NAIL It.

Home builder sentiment rose six points in March to 71, the highest reading since June 2005, while single-family housing starts rose to an annual pace of 872,000 units in February. Home builders D. R. Horton, KB Home, Lennar, PulteGroup and Toll Brothers have all rallied since the November election. On Wednesday, right before the Fed raised rates, the National Association of Home Builders (NAHB) announced that their Housing Market Index (HMI) surged six points to 71 in March. The index measuring builder confidence for the U.S. single-family home market for the next six months, hit its highest reading since June 2005.

US Housing Starts

Source: Bloomberg. Past performance does not guarantee future results. One cannot invest directly in an index.

Optimism is based on the expectations that regulatory reforms that have held back new home starts will soon be eased by Republicans. However, the NAHB warns that the index may slip in the months ahead on “rising materials costs, higher mortgage rates and shortages of lots and labor”. In fact, the same administration that is helping boost expectations, may be the force that dampens reality. President Trump’s order for immigration agencies to target undocumented immigrants is a cause for concern. For example, in California, the nation’s largest real estate market, more than 20 percent of all construction workers are undocumented. A crackdown on these workers, could drastically damage the California market, and beyond.


Source: Bloomberg. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For the most recent month-end performance please visit the funds website at direxioninvestments.com. One cannot invest directly in an index.

  

Indeed the bears may be even more encouraged by this fact: The HMI peaked at 72 in June 2005 and homebuilder stocks peaked a month after.

The Federal Reserve raised its Fed Funds rate to a range between 0.75 and 1 percent last Wednesday, and Chair Yellen indicated she still expects to raise rates at least twice more this year. So as rising rates intersect with possibly higher labor costs, will homebuilders continue to rise? Or will the bears CLAW back?

 

Related Funds:

 


Index Descriptions

  • Dow Jones U.S. Select Home Construction Index (DJSHMBT) –  Measures U.S companies in the home construction sector that provide a wide range of products and services related to homebuilding, including home construction and producers, sellers and suppliers of building materials, furnishings and fixtures and also home improvement retailers. As of December 31, 2016, the Index was comprised of 40 stocks and the companies included in the Index have a median market capitalization of $2.20 billion and an average market capitalization of $9.11 billion. One cannot directly invest in an Index.

 

Performance (as of 12/31/2016)

Ticker Fund   1-Mo % 3-Mo% YTD % 1-Yr % S/I % Inception Expense Ratio (Gross/Net) %

NAIL 

Daily Homebuilders & Supplies Bull 3x Shares  NAV 0.80 -3.36 -10.00 -10.00 -28.44 8/19/2015  2.50 / 1.19 
Market Close -1.13 -2.91 -12.21 -12.21 -28.26
CLAW Daily Homebuilders & Supplies Bear 3x Shares NAV -3.76 -4.93 -29.52 -29.52 -16.49 8/19/2015 1.94 / 1.10
Market Close -4.49 -7.91 -28.44 -28.44 -17.27

* The Net Expense Ratio includes management fees, other operating expenses and Acquired Fund Fees and Expenses. If Acquired Fund Fees and Expenses were excluded, the Net Expense Ratio would be 0.95%. The Funds’ Adviser, Rafferty Asset Management, LLC (“Rafferty”) has entered into an Operating Expense Limitation Agreement with each Fund, under which Rafferty has contractually agreed to cap all or a portion of its management fee and/or reimburse each Fund for Other Expenses through September 1, 2018, to the extent that the Fund’s Total Annual Fund Operating Expenses exceed 0.95% of the Fund’s daily net assets other than the following: taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses. If these expenses were included, the expense ratio would be higher.

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Returns for performance under one year are cumulative, not annualized. For the most recent month-end performance please visit the funds website at direxioninvestments.com. Short-term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns. Because of ongoing market volatility, fund performance may be subject to substantial short-term changes. For additional information, see the fund’s prospectus.

Shares of Direxion Shares are bought and sold at the market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Market Price returns are based upon the midpoint of the bid/ask spread at 4:00 pm EST (when NAV is normally determined) and do not represent the returns you would receive if you traded shares at other times. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV. Some performance results reflect expense subsidies and waivers in effect during certain periods shown. Absent these waivers, results would have been less favorable.

These leveraged ETFs seek a return that are 300% or -300%of the return of their benchmark index for a single day. The funds should not be expected to provide returns which are a multiple of the return of the benchmark’s cumulative return for periods greater than a day.

Direxion Shares Risks – An investment in the ETFs involve risk, including the possible loss of principal. The ETFs are non-diversified and include risks associated with concentration that results from the Funds’ investments in a particular industry, sector, or geography which can increase volatility. The use of derivatives such as futures contracts, forward contracts, options and swaps are subject to market risks that may cause their price to fluctuate over time. The Fund does not attempt to, and should not be expected to, provide returns which are a multiple of the return of the Index for periods other than a single day. Other risks include Correlation, Leverage, Compounding, Market Volatility, specific risks regarding securities in the Home Construction sector and for the Direxion Daily Homebuilders & Supplies Bear 3x Shares risks related to shorting. Please see the summary and full prospectuses for a more complete description of these and other risks of each Fund.

Distributor for Direxion Shares: Foreside Fund Services, LLC.