A near-term risk to the industrial sector could be stretched valuations.
“However, the sector’s P/E multiple appears to have broken out above its post-financial crisis range, making shares appear fully valued,” said AltaVista.
However, the sector is showing signs of breaking out with XLI trading just below its all-time set earlier this month.
“Late last week, the industrial sector broke out above that trading range like a missile leaving the launch pad, breaking its earthly bonds. On Monday of last week, the launch keys were being inserted and turned on, as the Institute for Supply Management’s manufacturing index reported not only an expansion in the manufacturing sector during May, coming in at 55.4, but a slight acceleration over the prior month. Further good news followed on Tuesday as factory orders reported a gain of 0.7 percent for April, which was slightly higher than expected,” said Laif Meidell of American Wealth Management.
Industrial Select Sector SPDR