State Street Materials Select Sector SPDR ETF

XLB

Market cap $7.16B

Sector investing — it's a typical strategy for advisors if their clients are looking beyond broad market exposure by targeting a specific sector. The concept is fairly straightforward, but implementing the strategy is not as simple as it sounds.

Technology stocks have flatlined so far in 2026 due to artificial intelligence sector (AI) fatigue. Materials and industrial shares are rising on economic optimism and the AI infrastructure buildout.

Launched on December 16, 1998, the State Street Materials Select Sector SPDR ETF (XLB) is a passively managed exchange traded fund designed to provide a broad exposure to the Materials - Broad segment of the equity market.

Materials companies operate at the front end of nearly every supply chain. When construction picks up, steel and cement move.

Dividend stocks and defensive sectors have dramatically outperformed as investors flee AI-vulnerable and AI-spending industries, but valuations now appear stretched. Consumer staples and energy sectors trade at historically high forward P/E multiples, often exceeding the S&P 500, despite lower long-term earnings growth prospects. Materials and industrials have also become extended, with valuations reflecting significant future earnings already priced in, especially given AI infrastructure spending.

Three income powerhouses are trading at very compelling valuations right now. Each offers attractive income with substantial upside potential. Here's why I'm overweighting them while the market is still giving them away at a discount.

Energy, basic materials, and defensive consumer stocks are in. Tech and financials are out.

Materials Select Sector SPDR ETF has outperformed all sectors with a 21% gain in the past quarter, signaling robust market momentum. XLB's strong, positive correlation (+0.71) with SPY, surpassing XLE's, highlights its value as a leading indicator of early-cycle industrial demand.

Three of the smallest sectors in the S&P 500 delivered the index's strongest performance in January, while the two largest sectors weighed on returns. The broad market index gained modest ground last month, with the State Street SPDR S&P 500 ETF Trust (SPY) up 0.6%, according to ETF Database.

Winter Storm Fern rattles the United States, lifting heating demand and natural gas prices as UNG stands out while airlines and consumers face headwinds.