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The U.S. stock market has recovered in 2023 after a terrible period that started in 2022 mostly due to the four-decade high domestic inflation. The Federal Reserve’s aggressive response by tightening monetary policy has brought down inflation from record highs in September and August 2022.
The Consumer Price Index continued to cool down and increased 3% year over year in June. The Producer Price Index has increased just 0.1% in the same period. These numbers suggest the economy will remain in the disinflation phase, giving Americans much-needed relief.
However, the Federal Reserve still holds its ambitious target of 2% long-term inflation. Fed Chairman Jerome Powell repeatedly mentioned the likelihood of two more quarter-basis-point hikes this year to counter the sticky inflation rising from a strong labor market.The payroll for June climbed 209,000 while the unemployment rate fell to 3.6%, and average hourly wages rose 4.4%. Investors have already discounted such events.
Technology stocks have made a strong recovery in 2023. More stable interest rates due to the cooling down of inflation have helped investors regain confidence. Interest rates have an inverse relationship with the valuations of technology stocks, as rising interest rates make finance operations more expensive for new-age technology companies. However, the growing use of artificial intelligence technology is helping tech companies save costs.
The consumer discretionary industry comprises companies that manufacture goods or provide services that consumers want but are not necessary, like clothing, luxury brands and travel-related requirements. With a dip in prices and a strong labor market, it is expected that the purchasing power will increase and demand for discretionary products will shine again.
Hence, with inflation moving toward a favorable region and a predictable interest rate, it is more likely that the technology and consumer discretionary industry as a whole will perform well and reward investors in the days ahead.
Thus, from an investment standpoint, we have selected four technology and consumer discretionary mutual funds expected to give a positive return amid easing inflation. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These funds, by the way, have given impressive 3-year and 5-year returns as well, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio compared to the category average.
Fidelity Select Semiconductors Portfolio (FSELX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FSELX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position, as well as market and economic conditions.
Adam Benjamin has been the lead manager of FSELX since Mar 15, 2020, and most of the fund’s holdings were in companies like Nvidia Corporation (25.6%), NXP Semiconductors (9.2%) and ON Semiconductor (8.2%) as of Feb 28, 2023.
FSELX’s 3-year and 5-year returns are 34.1% and 28.0%, respectively. The annual expense ratio of 0.69% is lower than the category average of 1.05%. FSELX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Construction and Housing Portfolio (FSHOX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the design and construction of residential, commercial, industrial and public works facilities, as well as companies engaged in the manufacture, supply, distribution, or sale of construction and housing products or services. FSHOX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position as well as market and economic conditions.
Jordan Michaels has been the lead manager of FSHOX since Sep 6, 2021, and most of the fund’s holdings were in companies like Home Depot (16.8%), Lowe’s Companies (15.4%) and Johnson Controls International (5.8%) as of Feb 28, 2023.
FSHOX’s 3-year and 5-year returns are 22.4% and 17.4%, respectively. The annual expense ratio is 0.76% compared to the category average of 0.79%. FSHOX has a Zacks Mutual Fund Rank #1.
Fidelity Select Leisure & Entertainment (FDLSX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the design, production, or distribution of goods or services in the leisure industries. FDLSX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position as well as market and economic conditions.
Kevin Francfort has been the lead manager of FDLSX since Sep 8, 2022, and most of the fund’s holdings were in companies like McDonald’s Corporation (16.8%), Booking Holdings (11.5%) and Hilton Worldwide (7.9%) as of Feb 28, 2023.
FDLSX’s 3-year and 5-year returns are 20.8% and 12.3%, respectively. The annual expense ratio is 0.74% compared to the category average of 0.79%. FDLSX has a Zacks Mutual Fund Rank #1.
DWS Science and Technology Fund (KTCSX - Free Report) invests most of its net assets along with borrowings, if any, in domestic common stocks and initial public offerings of science and technology companies, irrespective of their market capitalization. KTCSX advisors may also invest in companies from other developed and emerging market countriesin one or more industries in the technology sector.
Daniel J. Fletcher has been the lead manager of KTCSX since Dec 1, 2017, and most of the fund’s holdings were in companies like Microsoft (8.2%), NVIDIA (8.0%) and Apple (7.7%) as of Apr 30, 2023.
KTCSX’s 3-year and 5-year returns are 10.7% and 14.8%, respectively. The annual expense ratio is 0.73% compared to the category average of 1.05%. KTCSX has a Zacks Mutual Fund Rank #1.
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4 Top Mutual Funds to Gain From Cooling Inflation
The U.S. stock market has recovered in 2023 after a terrible period that started in 2022 mostly due to the four-decade high domestic inflation. The Federal Reserve’s aggressive response by tightening monetary policy has brought down inflation from record highs in September and August 2022.
The Consumer Price Index continued to cool down and increased 3% year over year in June. The Producer Price Index has increased just 0.1% in the same period. These numbers suggest the economy will remain in the disinflation phase, giving Americans much-needed relief.
However, the Federal Reserve still holds its ambitious target of 2% long-term inflation. Fed Chairman Jerome Powell repeatedly mentioned the likelihood of two more quarter-basis-point hikes this year to counter the sticky inflation rising from a strong labor market.The payroll for June climbed 209,000 while the unemployment rate fell to 3.6%, and average hourly wages rose 4.4%. Investors have already discounted such events.
Technology stocks have made a strong recovery in 2023. More stable interest rates due to the cooling down of inflation have helped investors regain confidence. Interest rates have an inverse relationship with the valuations of technology stocks, as rising interest rates make finance operations more expensive for new-age technology companies. However, the growing use of artificial intelligence technology is helping tech companies save costs.
The consumer discretionary industry comprises companies that manufacture goods or provide services that consumers want but are not necessary, like clothing, luxury brands and travel-related requirements. With a dip in prices and a strong labor market, it is expected that the purchasing power will increase and demand for discretionary products will shine again.
Hence, with inflation moving toward a favorable region and a predictable interest rate, it is more likely that the technology and consumer discretionary industry as a whole will perform well and reward investors in the days ahead.
Thus, from an investment standpoint, we have selected four technology and consumer discretionary mutual funds expected to give a positive return amid easing inflation. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These funds, by the way, have given impressive 3-year and 5-year returns as well, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio compared to the category average.
Fidelity Select Semiconductors Portfolio (FSELX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FSELX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position, as well as market and economic conditions.
Adam Benjamin has been the lead manager of FSELX since Mar 15, 2020, and most of the fund’s holdings were in companies like Nvidia Corporation (25.6%), NXP Semiconductors (9.2%) and ON Semiconductor (8.2%) as of Feb 28, 2023.
FSELX’s 3-year and 5-year returns are 34.1% and 28.0%, respectively. The annual expense ratio of 0.69% is lower than the category average of 1.05%. FSELX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Construction and Housing Portfolio (FSHOX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the design and construction of residential, commercial, industrial and public works facilities, as well as companies engaged in the manufacture, supply, distribution, or sale of construction and housing products or services. FSHOX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position as well as market and economic conditions.
Jordan Michaels has been the lead manager of FSHOX since Sep 6, 2021, and most of the fund’s holdings were in companies like Home Depot (16.8%), Lowe’s Companies (15.4%) and Johnson Controls International (5.8%) as of Feb 28, 2023.
FSHOX’s 3-year and 5-year returns are 22.4% and 17.4%, respectively. The annual expense ratio is 0.76% compared to the category average of 0.79%. FSHOX has a Zacks Mutual Fund Rank #1.
Fidelity Select Leisure & Entertainment (FDLSX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the design, production, or distribution of goods or services in the leisure industries. FDLSX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position as well as market and economic conditions.
Kevin Francfort has been the lead manager of FDLSX since Sep 8, 2022, and most of the fund’s holdings were in companies like McDonald’s Corporation (16.8%), Booking Holdings (11.5%) and Hilton Worldwide (7.9%) as of Feb 28, 2023.
FDLSX’s 3-year and 5-year returns are 20.8% and 12.3%, respectively. The annual expense ratio is 0.74% compared to the category average of 0.79%. FDLSX has a Zacks Mutual Fund Rank #1.
DWS Science and Technology Fund (KTCSX - Free Report) invests most of its net assets along with borrowings, if any, in domestic common stocks and initial public offerings of science and technology companies, irrespective of their market capitalization. KTCSX advisors may also invest in companies from other developed and emerging market countriesin one or more industries in the technology sector.
Daniel J. Fletcher has been the lead manager of KTCSX since Dec 1, 2017, and most of the fund’s holdings were in companies like Microsoft (8.2%), NVIDIA (8.0%) and Apple (7.7%) as of Apr 30, 2023.
KTCSX’s 3-year and 5-year returns are 10.7% and 14.8%, respectively. The annual expense ratio is 0.73% compared to the category average of 1.05%. KTCSX has a Zacks Mutual Fund Rank #1.
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 >>