The transportation index is a key metric for analysts to watch in terms of assessing the health of the broad market. As far as any potential roadblocks for transportation exchange-traded funds, the U.S.-China trade wars are certainly a potential danger, but selecting the right exchange-traded funds (ETFs) could relegate them to a mere speed bump.
The trade wars between the two largest economies have certainly been a negative factor for many sectors, and the transportation industry wasn’t immune to its effects.
“I think trade’s the big deal here, and it’s probably going to be negative,” said ETF Trends CEO Tom Lydon.
However, any weakness in the transportation sector could present an opportunity for investors to jump into a sector that could be morphing into a commodity.
“You need to recognize that it creates opportunities at the same time, if you are so inclined to take advantage of those market movements,” said Ric Edelman, co-founder and chairman of Edelman Financial Engines. “But the real key is that the transport industry is increasingly a commodity, even a brand like FedEx. I don’t really care. I want to get my package from here to there and I’m going to do it [via]whoever’s going to provide that service cheaper and faster, and brand really doesn’t matter anymore.”
“There’s no way that the governments around the world are going to tolerate this. We’re seeing dramatic reduction in productivity,” Edelman added. “China’s already suffering the biggest losses in its gains over decades now. The U.S. is beginning to be harmed, and when we move into the election, there’s no way that the government’s going to sustain this activity.”
Here are three ETFs that are moving in the transportation sector:
- iShares Transportation Average ETF (NYSEArca: IYT): seeks to track the investment results of the Dow Jones Transportation Average Index composed of U.S. equities in the transportation sector. The underlying index measures the performance of large, well-known companies within the transportation sector of the U.S. equity market.
- SPDR S&P Transportation ETF (NYSEArca: XTN): seeks to provide investment results that correspond generally to the total return performance of an index derived from the transportation segment of a U.S. total market composite index. The index represents the transportation segment of the S&P Total Market Index (“S&P TMI”).
- Direxion Daily Transportation Bull 3X Shares (NYSEArca: TPOR): seeks daily investment results equal to 300 percent of the daily performance of the Dow Jones Transportation Average. The index measures the performance of large, well-known companies within the transportation industry.
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