2013 can easily be labeled as a period of broad-based global recovery especially in the developed corner of the world. The U.S. market gained considerable strength prompting the Fed to approve a modest dial-back in its ‘QE’ program starting this month. Despite the taper announcement, the S&P 500 and the Dow Jones Industrial Average gave red hot performances.
With the broader market gathering steam, the industrial sector in the U.S. has once again taken center stage. Lately, the sector came up with the strongest data in two years (read: 3 Hot Sector ETFs Surging to #1 Ranks).
Upturn in US Manufacturing Activity
As per the ISM manufacturing index, manufacturing activity in the U.S. has grown for seven successive months in December. Financial data firm Markit’s final U.S. Manufacturing Purchasing Managers Index for December rose to 55.0, surpassing November’s 54.7 score.
Five years of ultra-low interest rates together with towering stock markets have shored up business confidence. Improved domestic demand for industrial equipment and better performance by the airline, railroads and shipping companies led the space higher. New orders and prices continued to post solid figures, giving plenty of reason to be optimistic about the sector.
Also, a reduced wage differential between the U.S. and emerging nations, still-low inflation rate and a weaker dollar as compared to its historic level are carving out the U.S. manufacturing industry. Revival in Europe and China is another positive for the sector, providing an impetus to the export profile of the U.S.
Thus, a look at the top-ranked industrial ETF could be a good idea to capture the surge in the space, especially based on the Zacks ETF Ranking system.
About the Zacks ETF Rank
The Zacks ETF Rank provides a recommendation for the ETF in the context of our outlook for the underlying industry, sector, style box or asset class. Our proprietary methodology also takes into account the risk preferences of investors. ETFs are ranked on a scale of 1 (Strong Buy) to 5 (Strong Sell) while they also receive one of three risk ratings, namely Low, Medium or High.
The aim of our models is to select the best ETFs within each risk category. We assign each ETF one of the five ranks within each risk bucket. Thus, the Zacks ETF Rank reflects the expected return of an ETF relative to other products with a similar level of risk.
For investors seeking to apply this methodology to their portfolio in the U.S. industrial equities space, we have taken a closer look at the top ranked FXR. This ETF has a Zacks ETF Rank of 1 or ‘Strong Buy’ (see the full list oftop ranked ETFs) and is detailed below: