SPDR Materials (XLB) is a sector ETF for basic products used in manufacturing, such as chemicals, steel, paper, wood, glass, and water treatment. As the smallest SPDR sector, it is the foundation for manufacturing industries, comprising 2.6% of the S&P 500.1 Companies in this sector, such as Linde plc (LIN), acquire, develop, prepare, and sell raw materials.
The ETF is diversified among chemicals (69%), metals and mining (17%), containers and packaging (10%), and construction materials (5%).2 The sector is cyclical and tends to perform well in an economy growing out of a recession as the public’s economic expectations improve. Demand in the sector is as volatile as the demands within its industries, such as for wood or metals. These vary with housing and construction development, energy infrastructure, and the transportation industry, among others.
Daily operations include material extraction and preparation for manufacturing in other industries. Companies in XLB operate production facilities, mines, and plants, where they develop prototypes and test new materials. Many are experiencing technological advancement, saving costs by streamlining manufacturing and labor processes.
Industries within XLB are subject to regulations on environmental impact and health and safety. This is especially true for companies that extract resources from the ground, provide energy resources, and produce chemicals. Investors must also keep up with trade and tariff news since the sector exists to export resources.
Based on sector data, XLB is diverse and technologically advancing but subject to varying demand and regulation. First State invests in the sector for its client portfolios. For a free consultation with professional wealth advisors, contact us today at (918) 492-1361.
Sources
1Select Sector SPDRs (Accessed Mar 17, 2023)
2State Street Global Advisors XLB The Materials Select Sector SPDR® Fund (Accessed Mar 17, 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.