Mining ETFs may be Able to Endure a Rate Hike

Broader mining and materials sector exchange traded funds, such as the SPDR Metals & Mining ETF (NYSEArca: XME) and the Materials Select Sector SPDR (NYSEArca: XLB) have been durable performers this year, something many market observers attribute to the Federal Reserve holding off on raising interest rates.

Many industrial metals and miners rallied on the belief that China would support growth through stimulus measures, augmenting demand for metals while enticing investors to jump back in. Moreover, the depreciating U.S. dollar made USD-denominated resources cheaper for foreign buyers. The ongoing global low-yield environment also pushed investors toward more attractive assets, like commodities.

SEE MORE: Treasury Bond ETFs Strengthen Despite Hawkish Fed Comments

Federal Reserve Chair Janet Yellen has maintained a dovish stance throughout the year, and most observers anticipate the Fed chief will likely raise rates at least one time this year, maybe in December. Looking at the fed fund futures market, options traders place a roughly 50-to-50 percent change of a 25 basis point hike at the December meeting.

“Two years ago Allianz Global Investors released an excellent study comparing the returns of different asset classes during Fed rate-hike cycles. The German firm with assets under management of $521 billion, looked at the six tightening periods since 1983,” reports Frik Els for