The US economy grew by 2 percent in the third quarter of this year and business activity accelerated in October, signs that corporate and consumer spending are holding up providing positive price support for the iShares Dow Jones US Industrials (IYJ), the Vanguard Materials ETF (VAW) and the PowerShares DB Base Metals (DBB).

According to the latest data from the Institute for Supply Management-Chicago Inc., economic expansion is at the forefront illustrated by its business barometer reading of a 60.6.  Furthermore, data suggests that output climbed at the fastest pace in the third quarter as companies are upgrading equipment and boosting output to meet enhanced increased foreign and domestic demand. 

The momentum behind this uptrend in manufacturing and industrials has been driven by improved capital investment, increases in output of business equipment and increases in consumer and investor confidence. As nations continue to recover, it appears that manufacturing and industrials likely will remain at the forefront of economic growth.

As previously mentioned, three ETFs that are directly correlated with the economic expansion include:

  • iShares Dow Jones US Industrials (IYW), which boasts industrial conglomerate General Electric (GE) as its top holding and closed at $47.11 on Friday.
  • Vanguard Materials ETF (VAW), which holds copper giant Freeport McMoRan-Copper & Gold (FCX) and industrials giant Dow Chemical (DOW) as top holdings.  VAW closed at $75.65 on Friday.
    • PowerShares DB Base Metals (DBB), which enables one to gain exposure to copper, aluminum and zinc; all metals that are expected to continue to witness insatiable demand around the world.  DBB closed at $22.75 on Friday.

When investing in these ETFs, it is equally important to consider the inherent risks that are involved.  To help mitigate the effects of these risks, the use of an exit strategy which identifies specific price points at which downward price pressure is likely to prevail is important.

Such a strategy can be found at and updated data indicates that the price points for the aforementioned ETFs are as follows: IYW at $59.08; VAW at $71.90; DBB at $21.94.  These price points are reflective of market volatility and change on a daily basis. 

Disclosure: No Positions

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