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A Rough Week for Transportation ETFs

This article was originally published on ETF Trends.com.

The iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN) each finished lower last week and some traders are concerned about the signals being sent by transportation stocks.

Going forward, the allure of infrastructure investing, which investors can easily engage in via exchange traded funds, could and should rise as governments around the world finally commit the capital necessary to upgraded dated and dangerous bridges, pipelines and roads. In the near-term, however, transportation investments could remain challenged.

“The last time the DJT was down more than 2% for the week at the same time the DJI was up at least 1% was in late July 2017,” said Schaeffer's Investment Research. “Prior to that, you'd have to go back to July 2006 for a signal. In fact, it's interesting to note that the last four signals occurred in the month of July. The year with the most signals was 1998 -- during the height of the dot-com boom -- with three. Since 1919, there have been just 23 such signals of DJT/DJI divergence, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.”

IYT tracks the Dow Jones Transportation Average (DJT). Transportation stocks were expected to benefit from lower oil prices and while that has been the case for airline stocks, other industry groups represented in IYT, including railroads, have lagged broader equity benchmarks.

The U.S. Global Jets ETF (NYSEArca: JETS) also stumbled last week, losing nearly 5%.

Airlines are also a significant part of IYT’s lineup. There are encouraging fundamental factors for airlines, including low oil prices. Fuel is the largest input cost for airlines. The improving U.S. economy could encourage more business and leisure travel and airlines are generating impressive amounts of cash.

JETS follows the U.S. Global Jets Index, which uses fundamental screens to select airline companies, with an emphasis on domestic carriers, along with global aircraft manufacturers and airport companies.

“One week after a signal, the DJI was down 1.39%, on average, and the DJT was down 1.19%. Both indexes were positive just 35% of the time. That's compared to average anytime one-week gains of 0.14%, with respective win rates of 57% and 53%,” according to Schaeffer's.

For more information on Transportation ETFs, visit our  Transportation category.

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