The best performers on the ASX this week

Australians are pouring record sums into ETFs. They've been marketed as safe, diversified and the smartest path to long-term wealth.

So far, they've delivered exactly that: steady growth and solid returns. But what if the world's safest trade is quietly morphing into something more dangerous? This new danger has a name: leveraged ETFs.

Unlike standard ETFs, these products don't just track the market; they magnify it.

A 2x ETF doubles every daily move while a 3x ETF triples it. For example, a 1% rise in the index means 2-3% gains. But flip that around, and a 1% fall instantly becomes a 2-3% loss. Worse, the daily compounding of those losses means your capital can decay far quicker than most investors realise.

This isn't just an individual investor's problem; it's systemic.

When markets fall, leveraged ETFs are forced to sell even more aggressively to meet their daily mandate. That selling pressure drives prices lower, which triggers even more selling. It's a vicious loop that can turn a correction into a crash.

And here's the historical warning. Back in the mid-2000s, Wall Street packaged up risky home loans into investments that looked safe. They carved them into "slices" where the top layers looked bulletproof, while the bottom layers absorbed the risk.

Then they created synthetic versions, bets on top of bets, which multiplied the exposure to the same mortgages across the entire financial system. It meant a slight fall in house prices caused massive losses everywhere. That hidden complexity and leverage nearly brought down the global financial system in 2008.

Leveraged ETFs today carry the same kind of danger. On the surface, they look simple by doubling or tripling the index's daily return. But behind the scenes, they use derivatives and constant rebalancing that can turn a small market drop into a much bigger hit.

Like the mortgage products in 2008, they've grown fastest when investors feel most confident, which is when the market is moving into the top of the cycle. And just like 2008, when markets turn, the built-in mechanics can magnify losses and trigger a chain reaction that spreads far beyond the people who own them.

When you add in the fact that net inflows into ETFs in Australia for the year ended 30 June 2025 almost doubled, it's clear we're not immune from this danger. ETFs have never been more popular, which also means they've never been more dangerous.

So, here's the real question: are ETFs the retirement plan of a generation, or the trigger for the next global financial crisis?

What are the best and worst-performing sectors this week?

The best-performing sectors include Materials, up more than 4%, followed by Energy and Utilities, both up more than 1.5%.

The worst performing sectors include Real Estate, down more than 2%, followed by Financials and Consumer Staples, both down more than 1.5%.

The best performing stocks in the ASX top 100 include Lynas Rare Earths, up more than 16%, followed by Reece Limited, up more than 11% and Sandfire Resources, up more than 10%.

The worst-performing stocks include Fisher & Paykel Healthcare, down more than 6%, followed by Ansell Ltd and Atlas Arteria, both down more than 5%.

What's next for the Australian stock market?

This week, the All-Ordinaries Index saw buyers and sellers battle for control, with neither side gaining the upper hand by Thursday's close.

The index finished almost exactly where it opened, but what's important is that it continued to hold firm above the 9000 mark, a level that is proving to be a reliable floor.

Early in the week, there was even an attempt to break higher, but sellers quickly stepped in to cap the move and keep the market contained within its sideways range.

What's most striking is how subdued September has been. It's usually one of the market's most bearish months, yet the index is down only around 2% so far.

Unless something unexpected breaks the pattern, October looks set to deliver more of the same: a steady pullback, but one tempered by the market's underlying resilience.

On the sector front, Materials are finally starting to shine, posting another strong performance this week. That's exactly what we've been waiting for, especially as Financials appear to be losing momentum.

If this rotation into Materials continues, it could drive the next rise on the index. Add in the possibility of more certainty around US-China trade relations, and the sector could gather real pace, because if there's one thing markets thrive on, it's clarity, even when the numbers themselves aren't spectacular.

For now, the playbook remains straightforward: a break above 9170 would confirm upward momentum and open the way to higher levels, while a decisive move below 9000 would likely set up a test of support around 8800.

Until then, patience is key, and those who wait for the breakout will be best positioned to take advantage when the next move comes.

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