This story originally appeared on Zacks
The industrial sector has been attracting investor attention as the gradual reopening of U.S. and global economies highlights brighter prospects. The S&P 500 Industrials index has already returned 29.3% in the past year compared with the S&P 500’s 28.9% rise.
– Zacks
In another positive development, optimism surrounding the news highlighting positive updates on Merck (MRK) and Ridgeback Biotherapeutics’ investigational oral antiviral medicine, molnupiravir, can support the sector. The update supports the spaces, which are expected to gain from the reopening of economies as the molnupiravir will help fight against COVID-19, if approved by the FDA.
Going on, U.S. consumer sentiment marginally improved despite rising concerns about coronavirus cases and inflation levels. The University of Michigan’s preliminary consumer sentiment inched up to 71 in September from 70.3 last month, per a BloombergQuint article.
The strength in consumer sentiment can be the primary driving force behind the solid performance by the consumer discretionary space as consumers are expected to splurge this holiday season after being restricted for more than a year.
The retail sales data has surprised investors pleasantly. According to a CNBC article, the metric inched up 0.7% sequentially in August 2021 against market expectations of a 0.8% decline. According to the Reuters article, online retail sales rose 5.3% last month after dropping 4.6% in July. There was an increase in clothing sales and building material and furniture.
The progress in coronavirus vaccine rollout presents a strong case in favor of a faster return to normalcy and economic recovery. The FDA has approved emergency use of a booster dose of the Pfizer Inc. (PFE) and BioNTech SE (BNTX) COVID-19 vaccine. President Joe Biden has also outlined an effective plan to accelerate the vaccination rate and control the coronavirus outbreak. He has made it mandatory for federal employees to get the COVID-19 vaccination, per a CNBC article. The Biden government will also issue guidelines to the Labor Department for imposing vaccine mandates for employers with more than 100 employees or running weekly tests.
Industrial ETFs in Focus
In the current scenario, we believe it is prudent to discuss ETFs that can gain from the growing optimism on the reopening U.S. economy:
The Industrial Select Sector SPDR Fund XLI
The fund seeks to provide investment results that, before expenses, match the performance of the Industrial Select Sector Index. Its AUM is $17.37 billion and expense ratio is 0.12% (read: Fed Plans QE Taper: Time for Cyclical Sector ETFs?).
Source: Entrepreneur