It’s been a frustrating 2011 for exchange traded funds that invest in materials stocks, which have been hurt by Europe’s relentless debt crisis and questions over the global economic recovery.
Materials Select Sector SPDR (NYSEArca: XLB) is down about 14% year to date. Other ETFs for this sector include iShares DJ US Basic Materials (NYSEArca: IYM), Vanguard Materials (NYSEArca: VAW) and First Trust Materials AlphaDEX (NYSEArca: FXZ).
“Strong infrastructure and construction spending in China have supported rallies in commodity prices in the past few years,” Morningstar analysts wrote in a profile of Materials Select Sector SPDR. [ETF Chart of the Day: Materials]
“Most materials firms produce commodity products and operate in a highly cyclical industry. Aside from cyclicality issues, many firms in this fund have to deal with volatile raw material and energy prices, [and]high fixed costs,” according to the report.