To get a pulse on the economy, one of the sectors to watch is the manufacturing sector and its associated index, the Manufacturing Purchasing Manager Index (PMI), which can open up potential trade opportunities.
November brings another PMI reading, which is becoming more crucial as each month passes by. Investors are already wary of headwinds associated with inflation in tandem with supply chain disruptions that could upset the economy.
“The humble manufacturing sector is home to what may be one of the most relied-upon leading economic indicators for assessing the state of the U.S. economy,” a Direxion Investments The Xchange article said. “Released monthly, the Purchasing Managers Index (PMI) is widely used by policymakers and business leaders alike to forecast changes in official economic data. It is also considered to be one of the most market-moving indicators released on a monthly basis.”
“At its core, the PMI is a survey of managers and executives at private sector companies who answer questions regarding business output, new orders, employment, costs, selling prices, exports, purchasing activity, supplier performance, backlogs of orders, and inventories of both inputs and finished goods,” the article added further.
The numbers could show that the economy is still in full-on recovery mode as the effects of the ongoing pandemic start to wane. September’s PMI data from the Institute of Supply Management (ISM) and IHS Markit were both positive overall.
“The U.S. manufacturing sector continues to run hot, with demand once again racing well ahead of production capacity as firms report widespread issues with supply chains and the availability of labor,” said IHS Markit’s chief economist Chris Williamson.
Tripling Up Leverage in the Industrial Sector
Traders eyeing a bullish opportunity in the industrial sector can look at this leveraged ETF — the Direxion Daily Industrials Bull 3X Shares (DUSL). The fund’s returned a strong 58% year-to-date performance according to Morningstar numbers.
DUSL seeks daily investment results of 300% of the daily performance of the Industrials Select Sector Index. The fund, under normal circumstances, invests at least 80% of its net assets in financial instruments, such as swap agreements, securities of the index, and ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.
The index includes domestic companies from the industrials sector, like aerospace and defense, industrial conglomerates, marine products, and more. The S&P 500 Industrials index is up 18% on the year.
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