During a season when investor activity is typically in its summer doldrums, these two industry exchange-traded funds (ETFs) were hotter than July — the iShares U.S. Home Construction ETF (ITB) and the SPDR S&P Global Natural Resources ETF (GNR).
Since the beginning of May, both funds have been rising to the upside. ITB is up over 11% and GNR is up over 7% the last few months, but their performances in that three-month window are just part of the story.
ITB data by YCharts
Strong July Inflows
Both funds have also been seeing strong investor inflows during the month of July. Over $380 million poured into these funds in July, with a steady, but elevated stream for ITB.
GNR, on the other hand, didn’t see inflows halfway through the month, but then shot up en route to its outstanding inflows to end July.
ITB tracks the iShares U.S. Home Construction ETF (ITB), providing blanket exposure to the movers and shakers within the homebuilding industry. Familiar names in its top holdings include DR Horton, Lennar, and PulteGroup—as explicitly mentioned in its fund name, it carries a home bias to U.S. homebuilders. While the real estate industry is fixated on what interest rates will do, rising inflows in ITB could mean investors are positioning themselves ahead of potential rate cuts to come. That said, ITB could present itself as a value-oriented option until lower rates give the real estate industry a push.
GNR tracks the S&P Global Natural Resources Index that casts a wide net in terms of exposure. It includes the 90 largest companies that diversify investors into agriculture, energy, metals, and mining. Under the hood, there are familiar names in its top 10 holdings, like Exxon, Shell, Chevron, and in the world of gold mining, Newmont Corp. Top holdings are also spread amongst countries that are domiciled in the U.S., the United Kingdom, Australia, Canada, and others, which speaks to its country diversification.
Because of its wide swath of exposure, ranging from agricultural to metals, it could serve as an investor’s broad-based commodities exposure. Adding assets non-correlated to the broader market can add diversification that is much needed in times like now where market uncertainty is still prevalent. Commodities also act as a hedge against rising prices should any unforeseen inflationary pressure arise.
Diversify Outside Big Tech
In a time when the current market environment is revolving around anything remotely associated to artificial intelligence (AI), a home construction and natural resources ETF appear to run counter to that trend. It’s also a reminder to investors that they can achieve diversification into other industry sectors as opposed to skewing heavily towards the information technology sector and riding the big tech wave.
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