What Boosted the Industrial Sector in January 2018?



Industrial sector in January 2018

In the previous parts of this series, we discussed how the S&P 500 Index (SPX-INDEX) and various sectors of the S&P 500 Index performed in January 2018. The technology sector remained the top performer of the S&P 500 Index during the month, and the Technology Select Sector SPDR ETF (XLK), which tracks the performance of the US technology sector, rose 7% in January 2018.

The Industrial Select Sector SPDR ETF (XLI), which tracks the performance of the industrial sector, improved 5.3% in January 2018. General Electric (GE), Boeing (BA), 3M (MMM), and Honeywell International (HON), major holdings of the XLI ETF, returned -7.3%, 20.2%, 6.4%, and 4.1%, respectively, in January 2018.

The industrial sector is a growth-driven sector and it is highly correlated to economic growth. Continued global economic growth could benefit various industrial stocks. Investment in infrastructure and defense is also a positive sign for various industrial stocks.

Plus, tax reform is expected to increase the profit margins of major industrial stocks. The expected improvement in the net profit of major industrial stocks due to tax reform could be used for capacity extension or new projects, which could boost the US economy.

In the next part of this series, we’ll analyze the performance of the consumer staples sector in January 2018.

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