The SPDR Industrials (XLI) sector includes everything from military defense to construction and other heavy machinery companies. XLI is a sensitive sector and comprises about 8% of the S&P 500.1
XLI is a diverse index. Its major allocations include machinery (22%), aerospace and defense (21%), industrial conglomerates (10%), and road and rail (10%).2 Other allocations include air freight and logistics (7%), electrical equipment (7%), commercial services and supplies (6%), building products (5%), professional services (4%), trading companies and distributors (3%), airlines (3%), and construction and engineering (1%).
Companies in XLI typically have large amounts of fixed assets. Purchase and maintenance costs can negatively affect profits, but depreciation leads to beneficial tax cuts. Depending on the industry, daily operations typically include contract work of various kinds, metal fabrication, transportation, and sales to businesses.
The sources of demand are diversified among a wide variety of economic factors. Increases in air travel, online shopping, city growth, and the U.S. Department of Defense all produce business.
First State Investment Advisors maintains a significant position in XLI stocks Raytheon Technologies (RTX), Honeywell (HON), Caterpillar (CAT), Boeing (BA), Deere & Co (DE), and General Electric (GE). First State also invests in the broad ETF for its client portfolios.
First State’s financial advisors customize all portfolios to meet client goals. Other services include financial planning and free consultations. For expert wealth managers, contact us at (918) 492-1361.
Sources
1Select Sector SPDRs (Accessed Jan 27, 2023)
2State Street Global Advisors XLI The Industrials Select Sector SPDR® Fund (ssga.com) (Accessed Jan 27, 2023)
This overview is for informational purposes only and is not a recommendation. It should not be the sole deciding factor in making an investment. Investing is a risk and, as with all risks, a positive return is not guaranteed. Past performance does not indicate future results.