Due to their close ties with the commodities market, the materials sector 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.
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.
“Lithium — which is used in products from AA batteries to the 787 Dreamliner — remains in big demand. The aggressive expansion of Tesla’s battery-powered cars has been a big reason for that.
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With production lagging demand, lithium prices have been firm, Bloomberg reports. But an analyst with London-based Roskill Information Services expects prices will peak in the second quarter of 2017 as more lithium production comes into the market,” adds IBD.
Global X Lithium ETF