After scuffling during the early stages of the second quarter, the Dow Jones Transportation Average is on the mend. The iShares Transportation Average ETF (NYSEArca:IYT), which tracks the widely followed transportation index, is higher by 2.3% over the past week and could be poised to deliver more upside in the coming weeks.
Transportation stocks were expected to benefit from lower oil prices and while that has been the case for airline stocks, other industry groups represented in IYT, including railroads, have lagged broader equity benchmarks, but that could change in the second half.
“The DJT formed its previous all-time high back in 2014-2015 in the vicinity of the 9200 level. Following a brutal decline during the 2015-2016 correction, the DJT appeared to be stuck in neutral for much of last year, even as many market segments were able to ascend to new all-time highs. Following the U.S. Presidential election last fall, the transport stocks finally got back in gear again,” according to ETF Daily News.
One of this year’s best-performing transportation ETFs is the U.S. Global Jets ETF (NYSEArca:JETS). The lone ETF dedicated to airline stocks is higher by about 17% year-to-date.
Related: Airline ETF Turns on the JETS
Airlines are also a significant part of IYT’s lineup. There are encouraging fundamental factors for airlines, including low oil prices. Fuel is the largest input cost for airlines. The improving U.S. economy could encourage more business and leisure travel and airlines are generating impressive amounts of cash.
JETS follows the U.S. Global Jets Index, which uses fundamental screens to select airline companies, with an emphasis on domestic carriers, along with global aircraft manufacturers and airport companies.
Along with lower oil prices, airline stocks look attractive in their own right. For instance, income-oriented investors may notice that airline stocks have seen improved dividend-yield growth. Additionally, the sector shows relatively cheap valuations.
“In about a month’s time, the DJT was able to climb roughly 15%, setting a new all-time high in the process. Since its December peak, however, the index has basically moved sideways for 7 months. That is not unusual, nor particularly unhealthy, for an index following a test of its former highs, however. The consolidation allows it go catch its breath and build up fuel to allow for a sustainable breakout to new highs, if and when it does come,” reports ETF Daily News.
IYT resides just pennies below a new 52-week high.