Transportation stocks and exchange traded funds, such as the iShares Transportation Average ETF (NYSEArca: IYT) and the SPDR S&P Transportation ETF (NYSEArca: XTN), have been among the equity market’s best post-election performers.
However, with many of these funds residing near new highs, some traders think the group could be ready to retreat. The benefit of that scenario would be better pricing for investors looking to initiate tactical industrial sector positions.
IYT, which follows the Dow Jones Transportation Average, is higher by more than 12% this month. Transportation stocks were expected to benefit from lower oil prices and while that has been the case for airline stocks, other industry groups represented in IYT, including railroads, have struggled.
Market observers are optimistic about a cyclical recovery where U.S. consumers and businesses spend more, which would add to increased activity through railways and transportation sectors. Railroads are popular plays among some of the largest investors, including Bill Gates and Warren Buffett.
Headwinds remain for the industrial sector. The sell-off in the oil markets has weighed on capital spending from the energy sector as producers hold off on new projects, pressuring U.S. industrial companies and sector-related exchange traded funds.