Morningstar Rating

ETF Research and Analysis

by Alex Bryan
Suitability
Materials Select Sector SPDR is currently the most-liquid materials exchange-traded fund on the market. It owns every materials company included in the S&P 500 Index. This includes companies operating in the chemicals,  Read more 

Bull Case

XLB is the most liquid materials-sector ETF available.
Some of the fund's larger holdings in the chemicals industry are shifting their focus up the value chain toward less cyclical, higher-margin specialty chemicals.
Low natural gas prices may continue to help the fund's North American chemical producers.  Read more 

Bear Case

Infrastructure investment in China may slow over the long term, creating a headwind for the fund's holdings.
New capacity may squeeze margins in the chemicals industry.
The fund's holdings operate in highly cyclical industries, where it is difficult to establish sustainable competitive advantages, and have to contend with volatile input prices.  Read more 

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