A Moment for Materials: Why Targeted Investment Makes Sense

The materials sector may face some challenges from the conflict in the Middle East, but plenty of tailwinds still work in favor of the sector. Materials companies are well-positioned to benefit from AI and infrastructure spending, a trend which can help the sector tap into long-term growth instead of being a cyclical play.

As tensions escalated in the Middle East in early March, the materials sector began to face a number of challenges. The mining industry has been pressured from the conflict as a whole, and gold and silver prices suffered as inflation fears rose. However, these headwinds have not put the sector on the sidelines by any means. In fact, many tailwinds are helping propel it forward, creating a compelling buy opportunity for advisors and investors. For instance, the sector's drivers of long-term demand don’t seem to be going away any time soon. These drivers include AI, infrastructure, electricity, and more. They are especially crucial, given that they’re leading materials ETFs to become less of a cyclical play and more of a long-term growth strategy.

Furthermore, the U.S. manufacturing industry is looking increasingly sound. U.S. manufacturing PMI data has shown resounding opportunities within the manufacturing industry. June’s report showed that the economic activity within the U.S. manufacturing sector expanded to 53.3% for the month. A stronger manufacturing industry thus bodes well for the materials sector as a whole.

The State Street Materials Select Sector SPDR ETF (XLB) can help those looking to build up their exposure to materials. XLB leverages the advantages of the ETF wrapper to invest in many of the materials companies within the S&P 500. As 2026 has progressed, investors have increasingly opted to allocate to XLB to tap into the materials opportunity set. Between January 1, 2026, and July 16, 2026, the fund has seen net flows of about $2.4 billion.