After more than doubling last year to rank as one of 2016’s best-performing non-leveraged exchange traded funds, the VanEck Vectors Steel ETF (NYSEArca: SLX) has cooled off in a big way this year. Year-to-date, SLX is lower by nearly 3% and over the past quarter, the steel ETF has tumbled more than 18%.
SLX tries to reflect the performance of the NYSE Arca Steel Index, which follows global companies involved in the steel industry.
The SPDR Metals & Mining ETF (NYSEArca: XME) is an alternative to SLX. XME is not a dedicated steel ETF but features ample exposure to that industry.
XME has been benefiting from rebounding areas of the mining industry that were previously punished, including gold, coal and steel. 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.
There is renewed hope that the Trump Administration’s infrastructure efforts could fan the flames of new rallies for ETFs such as SLX and XME.
“The document, grandly titled “A New Foundation for American Greatness,” encapsulates much of the “America first” message that powered Mr. Trump’s campaign. It calls for an increase in military spending of 10 percent and spending more than $2.6 billion for border security — including $1.6 billion to begin work on a wall on the border with Mexico — as well as huge tax reductions and an improbable promise of 3 percent economic growth,” reports the New York Times.
However, Trump’s plan is likely to be seen as controversial because the White House is targeting deep cuts to entitlement programs, including Medicaid, to offset infrastructure spending.
During the campaign, Trump proposed significant infrastructure spending as an avenue for boosting the U.S. economy. If those plans see the light of day, SLX and steel stocks could benefit. However, it is widely believed the Trump infrastructure plan will be pushed back to 2018, news that has disappointed investors to start 2017.
SLX has $150.6 million in assets under management and holds 27 stocks.
For more information on the steel industry, visit our steel category.