Retail sales have slowed down lately owing to rising prices. However, 2022 seems to have again turned things in favor of retailers, with sales bouncing back in January, according to the latest Mastercard SpendingPulse report. Sales have been growing across all sectors, which is a positive sign.

Interestingly, the jump in retail sales comes despite the consumer price index hitting a 40-year high. One major reason behind this uptick in retail sales is rising income, which has given people more spending power, helping the retail sector. Thus, funds like Fidelity Select Retailing Portfolio (FSRPX Quick QuoteFSRPX - Free Report) , Fidelity Select Consumer Staples Portfolio (FDFAX Quick QuoteFDFAX - Free Report) andFidelity Select Consumer Discretionary Portfolio (FSCPX Quick QuoteFSCPX - Free Report) are likely to benefit in the near term.

Retail Sales Bounce Back

After a not-so-impressive holiday season, retail sales bounced back in January. According to the latest Mastercard SpendingPulse report, retail sales excluding auto rose 7.2% in January year over year. Sales jumped across all sectors led by restaurant and apparel.

E-commerce, which has played a major role in helping the retail sector survive the rampage created during the pandemic, drove sales once again in January. Online sales grew 10.4% year over year in January. Compared to the pre-pandemic levels, retail sales surged 110.1% in January.

The pandemic led to a change in spending habit, with people buying more goods than services. However, as the economy started reopening, the trend reversed with people spending on services. This saw restaurant sales rise 36.7% on a year-over-year basis and 16.6% from the pre-pandemic levels.

However, apparel sales skyrocketed in January, climbing 37.6% to record its strongest growth for January in Mastercard SpeningPulse’s history. Sales were strong across all sections despite rising fears of Omicron and increasing prices. Spending on luxury goods increased 45.3% year over year, while jewelry sales rose 19.8%.

Given this scenario, February too is likely to be good, with Valentine’s Day being another lucrative period for retailers. Also, household savings hit a record high in 2021, which should boost consumer spending in the coming months.

3 Best Choices

We have, thus, selected three mutual funds with significant exposure to the retail sector that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Retailing Portfolio fund aims for capital appreciation. FSRPX invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.

This Zacks Sector-Other product has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 20.9% and nearly 20% over the past three and five-year periods, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 0.79%.

Fidelity Select Consumer Staples Portfolio fund aims for capital growth. FDFAX invests the majority of assets in securities of companies primarily engaged in manufacturing, marketing or distribution of consumer staples products. Fidelity Select Consumer Staples Portfolio fund invests in both U.S. and non-U.S. issuers.

This Zacks sector – Other product has a history of positive total returns for more than 10 years. Specifically, FDFAX has returned 15.6% and 9% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDFAX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.75% versus the category average of 0.76%.

Fidelity Select Consumer Discretionary Portfolio fund aims for capital appreciation. FSCPX invests the majority of assets in securities of companies typically engaged in production, distribution and marketing of consumer discretionary products. Fidelity Select Consumer Discretionary Portfolio fund invests in both U.S. and non-U.S. issuers.

This Zacks sector – Other product has a history of positive total returns for more than 10 years. Specifically, FSCPX has returned 18.6% and 16.5% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSCPX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76% versus the category average of 0.79%.

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