XME ETF

XME's recent weakness may be a buying opportunity as recession fears are likely overdone, with potential for a recovery rally post-election. XME tracks the S&P Metals and Mining Select Industry Index, holding a diversified yet volatile mix of 36 equally weighted large and small cap stocks. Despite recent economic indicators suggesting a downturn, the slow-moving cycle implies a recession might still be months away, making the current panic premature.

Copper prices hit a two-month low amid concerns about global growth trade and a rising US Dollar Index. I am downgrading the SPDR S&P Metals & Mining ETF (XME) from buy to hold, as the fund is more expensive on a P/E basis today versus last summer. XME faces technical challenges, too, with a broken uptrend.

SPDR® S&P Metals and Mining ETF is designed to track the performance of companies in the metals and mining industry, providing exposure to the global metals and mining industry. The XME ETF holds a diverse portfolio of stocks, including large-cap and small-cap companies in various segments of the metals and mining sector. XME has outperformed alternative metal and basic materials funds, but is still sensitive to macroeconomic factors and operational risks.

The SPDR S&P Metals and Mining ETF goes through periods of significant underperformance punctuated by significant outperformance. Economic expansion and infrastructure development are reliable drivers of XME, and the upcoming election year could be a good time to buy and hold XME. It has recently broken out of a large bull flag pattern suggesting the time is right to buy.

Steel manufacturing industry is changing due to government policies and the shift towards recycling old steel. Pre-manufactured metal buildings are driving the growth of the steel industry. Increasing construction activity is driving up the demand for metallurgical and thermal coal.

SPDR® S&P Metals and Mining ETF is an exchange-traded fund that provides exposure to the metals and mining industry, which is poised to benefit from infrastructure spending and renewable energy demand. The XME ETF is heavily weighted in steel and coal industries, making it more of an industrial play than a precious metals one. XME outperforms its peer ETF PICK due to different industry weightings and a lower expense ratio. However, it carries risks such as market volatility and geopolitical factors.

The SPDR S&P Metals and Mining ETF is recommended for investors seeking exposure to the metals and mining industry, including sub-industries like aluminum, coal, copper, and steel. Despite recent relative weakness, XME offers favorable valuation and decent technical trends, with a low expense ratio and a diversified sub-industry exposure. However, there is a risk due to high allocation to the cyclical steel industry, and potential volatility is expected in the event of poor earnings reports from major global steel companies.