U.S. industrial stocks have a strong start in 2026, with the Industrial Select Sector SPDR Fund (XLI) gaining 5.4% YTD as of Jan. 20. Positive economic indicators show growth in industrial production and capacity utilization, supporting machinery, transportation, aerospace, and electrical equipment sectors in XLI’s holdings.

Investors are looking at industrial stocks due to reshoring, supply chain diversification, and infrastructure investments. This trend, along with shifting investor preferences, has led to a solid performance for XLI. Mutual funds like Fidelity Select Materials (FSDPX) and Fidelity Select Defense & Aerospace (FSDAX) offer opportunities in the industrial sector.

FSDPX primarily invests in raw materials and intermediate goods companies, with a focus on the industrial cyclical sector. The fund, managed by Ashley Fernandes, has 3-year and 5-year annualized returns of 5.1% and 6.6% respectively, with a net expense ratio of 0.69% and a Zacks Mutual Fund Rank #2.

FSDAX focuses on defense and aerospace companies, with a significant portion dedicated to the industrial cyclical sector. Managed by Clayton Pfannenstiel, the fund has 3-year and 5-year annualized returns of 26.4% and 17.8% respectively, with a net expense ratio of 0.64% and a Zacks Mutual Fund Rank #2.

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