Due to their close ties with the commodities market, materials stocks and ETFs are susceptible to cyclical demand and volatility in raw material and energy prices. While the sector’s sensitivity to business cycles can expose investors to greater risks, the area may also offer attractive returns during periods of strong growth. Rivals to VAW include the Materials Select Sector SPDR (NYSEArca: XLB) and the Fidelity MSCI Materials Index ETF (NYSEArca: FMAT).
The White House “ultimately imposed a levy of 25 percent on steel and 10 percent on aluminum, but it exempted Canada and Mexico and gave other countries some wiggle room. The move is expected to increase prices, particularly on the commodities in question, which would benefit materials companies and hurt industrials,” according to Bloomberg.
The Guggenheim S&P Equal Weight Materials ETF (NYSEArca: RTM), which equally weights components and includes a larger tilt toward smaller U.S. companies, holds larger tilts toward construction materials sub-sector.
For more information on the materials sector, visit our materials category.