Is It The Right Time To Bet On Industrial ETFs?

The industrial sector, which took a hit from the disruption of global supply chains and the shutdown of factories, is expected to rebound as the economy reopens and the economic outlook improves. Moreover, the third quarter has witnessed U.S. manufacturing activity rising to a nearly two-year high in August owing to solid new orders.  

In such a scenario, the industrial sector seems to be sizzling with investment opportunities. Let’s look at some factors supporting the sector:

Encouraging Manufacturing Data

Per the Institute for Supply Management’s (ISM) Sep 1 statement, the index of national factory activity rose to a reading of 56.0 last month from 54.2 in July. Economists polled by Reuters forecast a rise in the index to 54.5 in August.

Moreover, the Commerce Department recently reported that new orders for U.S. manufactured goods rose for the third consecutive month in July by 6.4%. The uptick in July not only beat the consensus estimate of 5.6% but also matched the upwardly revised spike in June. The report also showed that factory orders for durable goods continued the upward movement, rising 11.4% in July compared with the 7.7% rise in the previous month. In fact, the third consecutive monthly jump was led by an increase in orders for transportation equipment that were up 35.6% from the prior month. Furthermore, orders for non-durable goods and shipments of manufactured goods rose 1.8% and 4.6%, respectively, in July.

Improving Economic Outlook

Notably, reports of a spike in new coronavirus cases across the United States seemed to subside a bit, buoying investors’ enthusiasm. Also, encouraging data indicating that the U.S. economy is gradually returning to the pre-pandemic level will add to the strength. In fact, the latest jobs data, which showed that the economy added 1.4 million jobs in August and unemployment rate dropped to 8.4% from 10.2%, is an indication of an improving economy. Encouragingly, about half the jobs that were lost during the pandemic have been recovered.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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