Heightened Tensions Amid Election Drama Could Bolster Direxion's DFEN Fund

All eyes are focused on the upcoming U.S. presidential election, with several indicators suggesting a tight race between Vice President Kamala Harris and former President Donald J. Trump. However, a shocking poll result in Iowa may have significant implications for the race and thus for the broader geopolitical paradigm.

According to pollster Ann Selzer of the Des Moines Register, Harris leads Trump 47% to 44% among likely voters. As Benzinga staff writer Bibhu Pattnaik mentioned, the significance is that "Trump held a four-point lead in the same poll in September – and led President Joe Biden by 18 points before Biden quit the race."

To be fair, another Iowa poll conducted by Emerson College Polling/RealClearDefense showed that Trump is leading Harris by 10 percentage points. Therefore, the Trump campaign dismissed the Des Moines Register/Mediacom survey as an "outlier poll."

Nevertheless, Selzer commands a strong reputation, having made controversial calls that later turned out to be correct. These calls included correctly predicting Trump's win in Iowa in 2016 and 2020. If the pollster turns out to be correct once more, investors may want to turn their attention to the geopolitical realm.

Harris has maintained the Biden administration's strong support of Ukraine in its efforts to expel Russia's invasion. At the same time, the vice president has also blasted Trump for his "friendship" with Russian president Vladimir Putin. Should Harris win on Tuesday, it's probable that every effort would be made to provide lethal aid to Ukraine. Cynically, this push would likely bolster the defense industry.

The DFEN ETF: Investors willing to speculate on an electoral victory for the Democrats may consider the Direxion Daily Aerospace & Defense Bull 3X Shares DFEN. A highly leveraged exchange-traded fund, DFEN seeks the daily investment results of 300% of the performance of the Dow Jones U.S. Select Aerospace & Defense Index.

Under the DFEN fund are leading defense contractors, such as RTX Corp RTX and Lockheed Martin Corp LMT. However, the ETF also includes companies that are tied to civilian aerospace infrastructure, particularly General Electric Co GE — which conducts business under GE Aerospace — and Boeing Co BA.

However, it should be noted that leveraged ETFs are incredibly risky. Further, investors should not hold a position for longer than one day. Otherwise, the daily compounding of volatility could lead to value erosion over time.

The DFEN Chart: Although DFEN predictably encountered significant choppiness, the overall picture has been bullish, with the fund gaining 34% on a year-to-date basis.

• The defense-focused ETF saw a noticeable pop higher on Monday off the back of the aforementioned Iowa poll.
• It's also interesting to note that DFEN began showing signs of life after President Joe Biden dropped out of the race, allowing Harris to shine.
• Nevertheless, investors should watch the broadening wedge formation that has developed since July, which may have bearish implications.

Featured photo by Robert Waghorn on Pixabay.

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