The Industrial Select Sector SPDR (NYSEArca: XLI), the largest exchange traded fund tracking industrial stocks, is sporting a modest year-to-date loss, underscoring the point that after surging last year, industrials are 2018 laggards. Some analysts believe the sector offers rebound potential.
Some big-name industrial stocks have been slammed on fears of an escalating trade war between the U.S. and China, the world’s two largest economies. In early April, shares of Dow component Boeing slipped after China announced a 25% tariff on airplanes in response to proposed tariffs by President Donald Trump’s administration on $50 billion worth of imports, including medicines, chemicals and consumer electronics.
“It hasn’t been a great year to be an investor in the industrials sector, with the Industrial Select Sector SPDR ETF (XLI) off 1% since the start of 2018, compared with a 1.7% gain for the S&P 500. Yet BMO Capital Markets’ Brian Belski doesn’t think that the group will be down for long,” reports Teresa Rivas for Barron’s.
XLI “seeks to provide precise exposure to companies in the following industries: aerospace and defense; industrial conglomerates; marine; transportation infrastructure; machinery; road and rail; air freight and logistics; commercial services and supplies; professional services; electrical equipment; construction and engineering; trading companies and distributors; airlines; and building products,” according to State Street.
What’s Next for XLI?
XLI holds 70 stocks. Its top 10 holdings include five Dow components, led by Boeing Co. (NYSE: BA), General Electric Co. (NYSE: GE) and 3M Co. (NYSE: MMM).
“Belski writes that given industrials’ underperformance this year–fueled by declines in big names such as Boeing (BA) and General Electric (GE)–it’s not surprising that some investors are starting to wonder whether or not it can outperform over the long term,” reports Barron’s.