Process Industries

The Process Industries sector transforms raw materials into finished products through chemical, physical, or biological processes and is fundamental to the global economy, providing essential building blocks for various sectors. Unlike discrete manufacturing, process industries involve continuous or batch production of materials like liquids, gases, powders, or sheets.

The performance of the Process Industries sector is influenced by economic indicators, technological advancements, and regulatory changes. Economic indicators like GDP growth and consumer confidence play a significant role. Technological advancements in smart manufacturing, Industry 4.0, AI, IoT, and automation optimize operations and enhance efficiency. Regulatory changes, especially related to ESG factors, drive decarbonization and sustainability, while geopolitical tensions and trade restrictions introduce volatility.

The Process Industries sector includes chemicals, pharmaceuticals, food and beverage, oil and gas, metallurgy and mining, pulp and paper, and building materials. Notable companies include DuPont de Nemours Inc., Air Products and Chemicals Inc., ChampionX Corporation, Linde plc, GE Aerospace, Scotts Miracle-Gro Company, Valvoline Inc., Siemens, ABB, Schneider Electric, and Honeywell.

As of July 2025, the Industrials sector has shown strong performance, slightly lagging the overall market. The outlook for industrial stocks appears optimistic for 2025, driven by reshoring, infrastructure investment, inventory recovery, electrification, and AI development. Caution is advised due to potential economic deceleration and overvalued stocks, with global trade policy introducing uncertainty.

Investing in the Process Industries sector involves a cyclical risk/reward profile, sensitive to economic cycles and commodity prices. Dividend yields can be lower than the S&P 500, but some companies have a long history of increasing dividends. Portfolio construction can offer exposure to fundamental economic activity, with some segments offering cyclical growth and others providing a blend of growth and defensive characteristics.