4 Sector ETFs to Bet Big On Despite Subdued Manufacturing Data

On Apr 1, 2022, the Institute of Supply Management (ISM) reported that its manufacturing index for March decline to 57.1% from 58.6% in February, well below market forecasts of 59%. This marked the slowest growth in factory activity since September of 2020.

A slowdown was seen in new orders (53.8 vs 61.7), production (54.5 vs 58.5) and backlog of orders (60 vs 65) and price pressures intensified (87.1 vs 75.6) due to instability in global energy markets, per tradingeconomics.

Fifteen manufacturing industries witnessed growth in March. Against this backdrop, below we highlight a few sectors that emerged winners last month.

Materials — iShares U.S. Basic Materials ETF IYM

Both Chemical Products and Fabricated Metal Products reported growth in March. The chemical industry takes about considerable portion of the fund IYM. The industry survey confirms that demand has been robust. Prices are rising for steel and steel products after a slight decrease from highs last month. IYM is up 38.3% past month.

Semiconductors — VanEck Semiconductor ETF SMH

Per the survey conducted by ISM, demand continues to be strong for the Electrical Equipment, Appliances & Components segment, though backlog is still increasing.  Demand is strong from the Computer & Electronic Products segment too. “No letup yet in supply chain challenges, especially electronic components,” hinted the ISM survey. Companies are depending on the broker market more and more. SMH is up 1.1% past month.

Food & Beverage — Invesco Dynamic Food & Beverage ETF PBJ

Demand for food and beverage should remain in the sweet spot in the coming days as these are necessary items and less ruffled by economic weakness. However, “the Russian invasion of Ukraine has created uncertainty in the grain markets, causing upward pricing pressure. In addition, inflationary pressures across all categories have made it challenging to manage cost and profitability,” revealed the ISM survey. PBJ has been up 2.8% in the past month.

Metals — SPDR S&P Metals and Mining ETF XME

The survey of the Primary Metals segment has indicated that the supply chain is still unstable. But the high demand for metal has kept the space charged-up. XME has been up 2.8% in the past month.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.