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Ignoring the Noise: The Long-Term Case for Materials

BY | ETF Database
10/01/2026 | 19 VIEWS
  • Related Symbols
  • XLB
September proved to be a fairly tumultuous month for many equity sectors outside of tech, and the materials sector was no exception.Key Takeaways: With the exception of tech, many equity sectors struggled to perform well in September. Despite this setback, the materials sector is still positioned well for the long-term due to its crucial role in the AI buildout. Those seeking to get ahead of a comeback in the materials sector may want to consider the State Street Materials Select Sector SPDR ETF (XLB A). Part of this performance is due to what happened to interest rates. The Fed’s decision to raise interest rates adversely affected the materials sector in particular, given that high rates slow down economic activity in areas like housing, manufacturing, and construction. Furthermore, storing and financing large quantities of materials becomes increasingly costly amid a higher rate regime. However, just because higher rates are pressuring materials for now doesn’t mean the sector is worth abandoning altogether. In fact, materials can still benefit from a crucial long-term tailwind that is not going away anytime soon: the AI buildout.A Constructive Environment for MaterialsThe AI buildout is not just about constructing the next innovative AI model. It’s about developing data centers and an energy grid that can support them. A wide array of metals and materials — such as copper, aluminum, and silver — will always be needed to support a stronger energy grid. See More: Costco Earnings Ignite Case for Consumer Staples The best part is that, ideally, support for stronger energy grids should come from a mix of spending from the public and private sectors. And this is all before one considers the infrastructure spending that’s happening outside of AI. Plus, the recent PCE data for August is already showing that inflation may be cooling. If that trajectory remains consistent, we may see rates hold steady or move downward in the months to come. This would work in favor of companies within the materials sector, among other equities.Target Materials Exposure Through XLBFor those who want to tap into the long-term value of materials, the State Street Materials Select Sector SPDR ETF (XLB A) can help. Charging only eight basis points, the fund offers exposure to the materials companies that sit within the S&P 500. Given its low cost and focused approach, XLB can help build a more diversified portfolio while positioning investors for momentum within materials. Given that many investors have minimal exposure to materials in their portfolios, the fund is well worth a look. For more news, information, and analysis, visit our Sector Investing Content Hub.

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