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3 Financial Mutual Funds That Stand to Gain From a Hawkish Fed
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The inflation rate in the United States continues to heat up. In June, the Consumer Price Index was recorded at 9.1% over the last 12 months and 1.3% on a monthly basis, making it the largest jump in four decades. Such a high inflation rate is mostly due to higher gasoline, shelter, and food prices, which are making a dent in the average citizen’s pocket.
To counter high inflation, economists predict that the Fed will yet again hike interest rates later this month. The central bank has already increased the interest rate in each of its meetings so far this year. In fact, last month's 75 bps hike was the biggest jump since 1994.
Due to the hike in interest rates, banking sector institutions, such as retail banks, commercial banks, investment banks, insurance companies, and brokerages that have cash holdings from customers and business activities, will see higher profitability due to increased lending rates. This will eventually increase their earnings and lead to higher spreads between the federal overnight fund rate and the rate the bank charges its customers.
We have thus selected three financial mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy) and have positive three-year and five-year annualized returns, minimum initial investments within $5000, and a low expense ratio. Notably, mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
T. Rowe Price Financial Services Fund, Inc. (PRISX - Free Report) seeks long-term capital growth by investing most of its net assets in companies engaged in the financial services industry. PRISX may also invest in companies having substantial revenues from business within the financial services sector.
Matt J. Snowling has been the lead manager of PRISX since Jul 1, 2021. Most of the fund’s exposure is in Wells Fargo 4.31%, Bank of America 4.13%, and short-term investment 3.84% as of 3/31/2022.
PRISX’s three-year and five-year annualized returns are almost 10.0%, and 9.1% respectively. PRISX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.80%, which is less than the category average of 1.08%.
To see how this fund performed compared in its category, and other 1, 2, and 3 Ranked Mutual Funds, please click here.
Fidelity Select Financial Services Portfolio (FIDSX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies primarily engaged in providing financial services to consumers and industry. FIDSX selects investments based on effective fundamental analysis techniques like the issuer’s financial condition, industry position, as well as market and economic conditions.
Matt Reed has been the lead manager of FIDSX since Jun 1, 2019, and most of the fund’s exposure is in Wells Fargo 6.57%, Bank of America 4.04%, and Morgan Stanley 3.62% as of 2/28/2022
FIDSX’s three-year and five-year annualized returns are almost 8.9%, and 8.1%, respectively. FIDSX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.72%, which is less than the category average of 1.08%.
Davis Financial Fund Class A (RPFGX - Free Report) seeks long-term capital growth by investing most of its assets along with borrowings, if any, in common stocks or through depositary receipts in companies that are principally engaged in the financial services sector. RPFGX follows strictly Davis Investment Discipline to invest in such companies.
Christopher Cullom Davis has been the lead manager of RPFGX since Jan 1, 2014, and most of the fund’s exposure is in Capital One Financial 8.23%, Berkshire Hathaway 6.92% and Wells Fargo 6.31% as of 3/31/2022.
RPFGX’s three-year and five-year annualized returns are almost 5.4% and 5.1%, respectively. RPFGX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.94% compared to the category average of 1.08%.
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3 Financial Mutual Funds That Stand to Gain From a Hawkish Fed
The inflation rate in the United States continues to heat up. In June, the Consumer Price Index was recorded at 9.1% over the last 12 months and 1.3% on a monthly basis, making it the largest jump in four decades. Such a high inflation rate is mostly due to higher gasoline, shelter, and food prices, which are making a dent in the average citizen’s pocket.
To counter high inflation, economists predict that the Fed will yet again hike interest rates later this month. The central bank has already increased the interest rate in each of its meetings so far this year. In fact, last month's 75 bps hike was the biggest jump since 1994.
Due to the hike in interest rates, banking sector institutions, such as retail banks, commercial banks, investment banks, insurance companies, and brokerages that have cash holdings from customers and business activities, will see higher profitability due to increased lending rates. This will eventually increase their earnings and lead to higher spreads between the federal overnight fund rate and the rate the bank charges its customers.
We have thus selected three financial mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy) and have positive three-year and five-year annualized returns, minimum initial investments within $5000, and a low expense ratio. Notably, mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
T. Rowe Price Financial Services Fund, Inc. (PRISX - Free Report) seeks long-term capital growth by investing most of its net assets in companies engaged in the financial services industry. PRISX may also invest in companies having substantial revenues from business within the financial services sector.
Matt J. Snowling has been the lead manager of PRISX since Jul 1, 2021. Most of the fund’s exposure is in Wells Fargo 4.31%, Bank of America 4.13%, and short-term investment 3.84% as of 3/31/2022.
PRISX’s three-year and five-year annualized returns are almost 10.0%, and 9.1% respectively. PRISX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.80%, which is less than the category average of 1.08%.
To see how this fund performed compared in its category, and other 1, 2, and 3 Ranked Mutual Funds, please click here.
Fidelity Select Financial Services Portfolio (FIDSX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies primarily engaged in providing financial services to consumers and industry. FIDSX selects investments based on effective fundamental analysis techniques like the issuer’s financial condition, industry position, as well as market and economic conditions.
Matt Reed has been the lead manager of FIDSX since Jun 1, 2019, and most of the fund’s exposure is in Wells Fargo 6.57%, Bank of America 4.04%, and Morgan Stanley 3.62% as of 2/28/2022
FIDSX’s three-year and five-year annualized returns are almost 8.9%, and 8.1%, respectively. FIDSX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.72%, which is less than the category average of 1.08%.
Davis Financial Fund Class A (RPFGX - Free Report) seeks long-term capital growth by investing most of its assets along with borrowings, if any, in common stocks or through depositary receipts in companies that are principally engaged in the financial services sector. RPFGX follows strictly Davis Investment Discipline to invest in such companies.
Christopher Cullom Davis has been the lead manager of RPFGX since Jan 1, 2014, and most of the fund’s exposure is in Capital One Financial 8.23%, Berkshire Hathaway 6.92% and Wells Fargo 6.31% as of 3/31/2022.
RPFGX’s three-year and five-year annualized returns are almost 5.4% and 5.1%, respectively. RPFGX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.94% compared to the category average of 1.08%.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>