10 Materials ETFs That Out-Muscle the Benchmarks

by: Gary Gordon

The Institute for Supply Management (ISM) released its survey of manufacturing activity on 9/1/10. The August Manufacturing Report on Business gave us its thirteenth consecutive month of expansion with a surprisingly robust reading of 56.3. Index readings higher than 50 indicate growth.

“Boo-bears” are busy scouring the report for negative headlines to embrace. Construction spending decreased more than anticipated. ADP job numbers failed to meet expectations. Heck, if you review enough web logs, you’ll come across a “light-volume-in-the-summertime“ comment or three.

Nevertheless, the manufacturing expansion is not only real, it’s a worldwide trend. Demand for copper, cotton, sugar, wheat, industrial metals… most commodities… has risen substantially since the end of June. And can anyone seriously downplay the takeover announcements for raw material producers? Through the first 8 months of this year, the $185 billion announced represents the most since 2007.

There’s strength in corporate America… strength in corporations all around the globe. Yet, there are challenges when it comes to balooning government debt in the developed world. And an unwillingness to significantly ramp up hiring is the macro-economic nightmare that continues to haunt.

For now, though, take a look at recent trends in the materials sector as a leading indicator. 8 Materials ETFs and 2 Country ETFs with extreme weightings in the sector are all out-muscling the competition:

Popular Materials ETFs Over The Past 2 Months (7/2/2010-9/1/2010)
Approx %
iShares MSCI South Africa (NYSEARCA:EZA) 14.7%
Market Vectors Steel (NYSEARCA:SLX) 13.8%
Market Vectors Hard Asset Producers (NYSEARCA:HAP) 13.7%
iShares MSCI Brazil (NYSEARCA:EWZ) 13.7%
iShares DJ Basic Materials (NYSEARCA:IYM) 13.3%
Materials Select Sector SPDR (NYSEARCA:XLB) 12.8%
iShares Emerging Market Materials (NASDAQ:EMMT) 12.6%
iShares Global Materials (NYSEARCA:MXI) 12.5%
Global X China Materials (NYSEARCA:CHIM) 11.6%
Claymore Global Timber (NYSEARCA:CUT) 8.6%
S&P 500 4.7%
iShares All World Index (NASDAQ:ACWI) 7.6%

Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.

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