Airlines are also a significant part of IYT’s lineup. There are encouraging fundamental factors for airlines, including low oil prices. Fuel is the largest input cost for airlines. The improving U.S. economy could encourage more business and leisure travel and airlines are generating impressive amounts of cash.
The good news is that, on a technical basis, IYT’s recent pullback looks healthy which could indicate the retreat is a buying opportunity.
“Looking at the chart of IYT, transportation stocks on average have been trading in a bullish uptrend channel, and their price action has been helped on by Trump winning presidency,” according to a Seeking Alpha analysis of IYT. “The recent pullback in the ETF brings it back around previous support levels of 163-166, and price action is now consolidating around there. This in no way shows that the market has lost confidence in Trump’s infrastructure reform plans. If anything, this is a small correction, and should be bought into, especially given the confluence of support around these levels – from horizontal price support levels coupled with the uptrend channel.”
If the dollar falls as markets price in the Federal Reserve not being able to raise interest rates later this year, industrials could benefit because some members of the sector generate substantial portions of their revenue overseas. Transportation stocks are part of the broader industrial sector.