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Investors Just Placed Their 2nd Biggest Ever Bet on Industrials

Investors poured $1.35 billion into the Industrial Select SPDR Fund last week.

by Sid Verma
(Bloomberg) --The “Trump trade’’ is back.

Investors poured $1.35 billion into the Industrial Select SPDR Fund last week, an allocation only surpassed by the record inflow notched in the aftermath of the U.S. election, and the largest commitment among U.S.-listed exchange-traded funds across asset classes.

The flood of interest underscores bullish bets that the upswing in global manufacturing will add fresh legs to the rally in industrial stocks, which are acutely sensitive to economic activity around the world.

The ETF, the biggest in its sector with $12.6 billion of assets, has posted a whopping 17 percent return this year, outperforming the S&P 500’s 14 percent gain.

As global reflation bets intensify, spurred by solid consumption and manufacturing data as well as hopes of U.S. tax reform, investor positioning towards the fund, known as XLI, remains bullish. Short interest as a percentage of shares outstanding is just 2.5 percent compared with a one-year average of 4 percent.

Traders are also betting tranquil market conditions will continue, with the fund’s 30-day implied volatility at 9.4 percent compared with a 12 percent average over the past year.

Last week’s inflow is even-more impressive considering the dollar’s advance over the past month, which tends to erode the value of profits generated overseas. The fund’s top holdings include firms with expansive global footprints, such as General Electric Co., Boeing Co. and Caterpillar Inc.

To contact the reporter on this story: Sid Verma in London at [email protected] To contact the editors responsible for this story: Samuel Potter at [email protected] Cecile Gutscher

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