30
Jan

Material ETFs are Prime Trump Plays – ETF Trends

The Materials Select Sector SPDR (NYSEArca: XLB) and other materials exchange traded funds are extending bullishness that started last year. Much of the enthusiasm for the sector is being tied to President Donald and his various plans for improved infrastructure and border security.

President Donald Trump’s has reiterated his plan to build a wall along the Mexican border, reinforcing construction and materials-related exchange traded funds. Additionally, materials ETFs are seen as beneficiaries of Trump’s ambitious $1 trillion infrastructure spending plan.

Rivals to XLB include Vanguard Materials ETF (NYSEArca: VAW) and Fidelity MSCI Materials Index ETF (NYSEArca: FMAT).

Additionally, the Guggenheim S&P Equal Weight Materials ETF (NYSEArca: RTM), which equally weights components and includes a larger tilt toward smaller U.S. companies, holds larger tilts toward construction materials sub-sector.

“BK Asset Management’s Boris Schlossberg believes Trump is going to make good on his promises in spending on a wall and on infrastructure nationally,” according to CNBC. “Interestingly enough, one of the stocks in the materials space that could benefit from such spending would be Cemex, a Mexican cement and building materials manufacturer, Schlossberg noted.”

Due to their close ties with the commodities market, materials stocks and ETFs are susceptible to cyclical demand and volatility in raw material and energy prices. While the sector’s sensitivity to business cycles can expose investors to greater risks, the area may also offer attractive returns during periods of strong growth.

The wall between the U.S. and Mexican border has been one of Trump’s key promises during his presidential campaign trail. The president has also promised to increase spending on construction, including $1 trillion into infrastructure. Trump’s plans to raise a wall across the Mexican border and other spending policies could fuel demand for cement, concrete and crushed stone.

With the economy recovery maturing, the materials sector, which is closely tied to the prices of raw materials, have traditionally done well as inflation rises and late-cycle economic expansions help support demand.

“So far this year, the sector’s leaders have been Freeport-McMoRan, CF Industries and Sherwin-Williams, rising 20 percent, 14 percent and 13 percent, respectively. A popular materials exchange-traded fund, the XLB, has risen 12 percent since the U.S. election and 6.5 percent this year,” reports CNBC.

For more information on the materials sector, visit our materials category.

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