Materials lag with double-digit decline in H1 amid macro pressures

Materials lag with double-digit decline in H1 amid macro pressures

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Materials stocks dropped over 17% in the first half of 2022, compared with a 21% drop for the SPDR S&P 500 Trust ETF (SPY). Materials Select Sector SPDR ETF (XLB) was also down over 19% during the period.

Industrial metals have had a rough six months, hurt by some of the tightest supply conditions ever. On the London Metal Exchange, three-month copper (HG1:COM) closing prices have fallen around 13%, while aluminum prices have dropped around 12% despite a rally that ended in early March.

London copper prices are lower on Thursday and are headed for a nearly 20% loss for Q2, the biggest quarterly decline since 2011, with base metals in general headed for the worst quarterly fall since the 2008 global financial crisis.

Lumber futures (LB1:COM) too have tumbled in the first half by more than 43%. U.S. home prices are up 42% since the start of the pandemic, which combined with higher interest rates are making housing unaffordable, mortgage data firm Black Knight told Bloomberg.

Precious metals have had a roller-coaster year so far as well. Gold (XAUUSD:CUR) rallied in the aftermath of the Russia invasion and more recently as recession fears rise and central banks tighten, triggering an exodus from equities.

Gold has since entered a period of correction and has also been weighed down recently as the dollar rallied on the increasing likelihood of steep interest rate hikes by the U.S. Federal Reserve. “There’s no safety trade anywhere, so gold will be liquidated,” Phillip Streible, chief market strategist at Blue Line Futures in Chicago, told Reuters. “There’s a massive correction going on, and when volatility gets that high, you can’t find safety or comfort anywhere.

Let’s take a look at the top-performing material stocks ($2B market cap or more) for H1:

  • Alpha Metallurgical Resources (AMR) +104.65%
  • Turquoise Hill Resources (TRQ) +64.80%
  • Sociedad Quimica y Minera de Chile (SQM) +64.58%
  • Sigma Lithium (SGML) +45.70%
  • CF Industries Holdings (CF) +21.45%

The worst performing material stocks ($2B market cap or more) for H122 were:

  • Scotts Miracle-Gro (SMG) -52.01%
  • James Hardie Industries (JHX) -45.81%
  • Cemex SAB de CV (CX) -41.32%
  • Summit Materials (SUM) -41.72%
  • Quaker Chemical (KWR) -37.63%

Other materials ETFs to watch: iShares Global Timber & Forestry ETF (WOOD), Materials Select Sector SPDR ETF, Vanguard Materials ETF (VAW), iShares Global Materials ETF (MXI), SPDR S&P Metals and Mining ETF (XME), VanEck Vectors Gold Miners ETF (GDX), iShares MSCI Global Gold Miners ETF (RING), Global X Copper Miners ETF (COPX).

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