The Materials Sector on Wall Street witnessed a challenging 2024 and emerged as one of the worst-performing sectors in the S&P 500, declining 1.5%. Global economic concerns, including a slowdown in China, the world's largest industrial economy, and interest rates not coming down sufficiently, influenced the sector’s performance. Dampening demand for materials such as steel, copper and chemicals, adversely impacted companies across the sector.
However, monetary policy shifts in global central banks, including the Fed, have initiated interest rate cuts after a period of tightening. Lower rates can reduce borrowing costs for materials companies and stimulate demand in the construction and manufacturing sectors. Also, China has unveiled economic stimulus packages aimed at revitalizing its economy. Given China's significant role as a global importer, this stimulus could lead to increased demand for materials.
Copper producers, for instance, may benefit from both short-term economic rebounds and long-term supply-demand imbalances. Copper is essential in electric vehicles and renewable energy infrastructure sectors, which are anticipated to expand in the coming years. President Trump's decision to impose a 25% tariff on all steel and aluminum imports should boost domestic production by reducing foreign competition.
The tariffs have also intensified the geopolitical race to own rare earths and critical minerals. China's retaliatory export restrictions on key materials like terbium and dysprosium have disrupted supply chains, affecting industries such as electric vehicles and defense. In response, the United States is accelerating efforts to boost domestic production, including initiatives to streamline mining permits and develop processing capabilities.
While the Materials sector faced headwinds in 2024, the outlook for 2025 is more promising. Economic stimulus measures, lower interest rates and sector-specific growth areas provide a favorable environment for recovery. Investors may find opportunities in companies that are strategically positioned to benefit from these macroeconomic and industry-specific trends.
Top Picks
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or #2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here, V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Steel Dynamics, Inc. STLD is a steel producer and metal recycler from the United States. STLD’s expected earnings growth rate for the current year is 3%. The Zacks Consensus Estimate for its current-year earnings has improved 17.7% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
The Andersons, Inc. ANDE is a company engaging in the trade, renewables, nutrient and industrial sectors. ANDE’s expected earnings growth rate for the next year is 22.8%. The Zacks Consensus Estimate for its current-year earnings has improved 4.5% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Intrepid Potash, Inc. IPI is a potassium, magnesium, sulfur, salt and water products company. IPI’s expected earnings growth rate for the current year is 46.7%. The Zacks Consensus Estimate for its current-year earnings has improved 64.4% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
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Steel Dynamics, Inc. (STLD): Free Stock Analysis Report The Andersons, Inc. (ANDE): Free Stock Analysis Report Intrepid Potash, Inc (IPI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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