The industrial sector and the corresponding exchange traded funds endured a slack earnings report recently from Dow component General Electric Co. (NYSE: GE) to steadily climb higher. In fact, many of the marquee industrial ETFs reside at or near new highs.
That includes the iShares U.S. Industrials ETF (NYSEArca: IYJ), which is up 3.5% year-to-date and more than 34% over the past year.
Although the aerospace and defense industry is perceived as being beholden to Uncle Sam’s whims, the allure of late-cycle sectors, including industrials, in a rising rate environment remains in place. Industrials perform well when interest rates rise because rising rates can go hand-in-hand with economic growth. Increased infrastructure spending is also seen as a catalyst for industrial stocks and ETFs.
Hence why industrial ETFs are seen as prime beneficiaries of Donald Trump occupying the White House. On the campaign trail, Trump pledged to spend $1 trillion to shore up America’s roads, bridges, railways and other infrastructure.