The Institute for Supply Management (ISM) said on Nov 2 that its index of national factory activity rose to a reading of 59.3 last month from 55.4 in September. That marked the strongest expansion since September 2018. Economists polled by Reuters had forecast that the index would rise to 56.4 in October.
Faster increases in new orders (67.9 vs. 60.2), new export orders (55.7 vs. 54.3), production (63 vs. 61), and an uptick in employment (53.2 vs. 49.6) and inventories (51.9 vs. 47.1) led to the surge. New orders sub-index reading of 67.9 marked the highest reading since January 2004. Manufacturing employment grew for the first time since July 2019.
The coronavirus crisis has changed consumers’ spending pattern, which focused more on goods than services. Spending on goods has toppled its pre-pandemic level, per CNBC.
Of the 18 manufacturing industries, 16 reported growth in August. The winning industries are Wood Products; Plastics & Rubber Products; Primary Metals; Food, Beverage & Tobacco Products; Chemical Products; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; and Machinery among others.
Against this backdrop, below we highlight a few ETF areas that emerged winners in the month of October.
Wood Products – iShares Global Timber & Forestry ETF WOOD
Timber-related exchange traded funds have been on solid momentum as lumber prices are rising. A solid housing market is acting as a huge source of demand for lumber. Solid demand for home-furnishing goods should also make wood products market red hot.
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 and coronavirus threat.
Computer & Electronic Products – VanEck Vectors Semiconductor ETF SMH
The computer and peripherals space has been a winner amid the COVID-19 pandemic due to social distancing and the prevailing work-and-learn-from-home culture. Apart from the renewed virus threat and the resultant spike in electronic activities, the ongoing fourth quarter of the year should also mark higher demand for semiconductors as computer and electronic products are likely to see solid sales in the Holiday Season. This clearly points at an upbeat outlook.
Apparel – SPDR S&P Retail (NYSE:XRT) ETF XRT
U.S. apparel sales have been steadily recovering from the pandemic-induced lockdown. The holiday season could act as another tailwind. In September, sales at clothing stores rose by 11% sequentially. The XRT fund puts about 16.97% weight in the apparel segment.
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SPDR SP Retail ETF (XRT): ETF Research Reports
VanEck Vectors Semiconductor ETF (SMH): ETF Research Reports
iShares Global Timber Forestry ETF (WOOD): ETF Research Reports
Invesco Dynamic Food Beverage ETF (PBJ): ETF Research Reports
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