Materials ETFs Shaping up as Second-Half Plays

The materials sector is the third-best performer in the S&P 500 this year, trailing only the utilities and groups. Good news for investors: The materials sector and exchange traded funds such as the Materials Select Sector SPDR (NYSEArca: XLB) are shaping up as solid sector-level ideas for the second half of 2016.

As markets move toward the late-cycle phase of the normal business cycle, investors should look to areas like the materials sector and related exchange traded funds (ETFs). 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.

Related: ETF Traders Turning Bearish on Gold Miners

“The materials sector has been one of the S&P’s leaders so far in 2016 with returns trailing only utilities and energy. Todd Rosenbluth, director of ETF & mutual fund research at S&P Global Market Intelligence, said there are a number of worthwhile materials ETFs for investors looking to jump in mid-year,” reports

Looking at the basic materials sector, this market segment is dominated by chemicals producers, like Dow Chemical (NYSE: DOW), DuPont (NYSE: DU) and Monsanto (NYSE: MON), along with smaller tilts toward metals and miners, paper and timber, containers and packaging, and construction materials.


Materials ETFs such as XLB, the Vanguard Materials ETF (NYSEArca: VAW) and the Fidelity MSCI Materials Index ETF (NYSEArca: FMAT) have also been bolstered this year by rebounding steel equities.