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Markets suffered a bloodbath after the Brexit stunner. But the losses were quickly recovered without much ado. Eventually, benchmarks continued to hit fresh highs at the end of almost every trading session this week. A slew of factors ranging from hints of fresh stimulus measures by Bank of England (BOE) and Bank of Japan (BOJ) to stronger-than-expected domestic earnings mostly led by JPMorgan Chase & Co. (JPM - Free Report) pushed stocks higher.
The uptick also came on the back of a strong June’s jobs report, while oil prices also recouped as markets gathered strength. Given this striking rally, risk loving investors would like to make the most of high beta mutual funds. Such funds are exposed to stocks that are poised to give even better returns than the broader markets due to the bullish sentiment.
S&P 500, Dow Close at Record High
The S&P 500 ended at an all-time high for the fourth consecutive session on Thursday, its longest such winning streak since Nov 2014. The S&P 500 rose 11.32 points or 0.5% to close at 2,163.75. The benchmark index had touched an intraday record high of 2,168.99. The Dow also touched its third record high in a row. The blue-chip index closed at 18,506.41, gaining 134.29 points, or 0.7%.
As indexes set records, market turbulence also ebbed. The CBOE Volatility Index (VIX) plunged almost 50% since reaching a four-month high on June 24. U.S. stocks bounced back after suffering from a serious case of “Brexit Blues.” Market pundits had cautioned that a Brexit will negatively affect the global economy and fuel volatility in world markets. So, what are the factors behind the continuous surge this week?
Fresh Stimulus Measures on the Cards
Even though the BOE kept its benchmark lending rates steady at 0.5%, the central bank did say that most of its members are expecting a loosening of policy in August. This reassured investors who were expecting further stimulus measures to stem the rot of an already reeling economy. Such an assurance supported a rally in riskier assets including stocks.
Equities also climbed as speculation grew that Japan’s Prime Minister Shinzo Abe is contemplating the so-called helicopter money in order to stimulate economic growth. In this case, the government issues non-marketable perpetual bonds with no maturity date, which the BOJ directly buys. This works as a tool to overcome deflation.
Upbeat Quarterly Earnings, JPM Shines
Better-than-expected results from large financial institutes, including JPMorgan, too powered the climb. JPMorgan’s second-quarter 2016 earnings of $1.55 per share handily outpaced the Zacks Consensus Estimate of $1.43. J.P. Morgan’s report in particular holds the promise of better results from banks and brokers in the coming days.
But it was June’s robust jobs data that was primarily responsible for pushing stocks higher. The U.S. economy created a total of 287,000 jobs in June, significantly higher than the consensus estimate of 177,000. The domestic economy added higher-than-expected new jobs for the first time in the last four months.
Other major economic reports also suggest that the economy is on a solid footing. Manufacturing activity climbed to its highest level in June in almost 16 months, while the service sector index in the U.S. jumped to a seven-month high (read: 4 Mutual Funds to Ride Sturdy Manufacturing Data).
Producer price index also increased last month indicating a healthier level of inflation and growth. Additionally, household spending had increased in May, a sign that consumers are more optimistic about the economy.
4 High Beta Mutual Funds for Enticing Returns
Given this bullish sentiment, investors may invest in mutual funds that are mostly exposed to stocks having a high beta. This is because high beta (greater than 1) offers the possibility of higher returns than the market, especially in bullish conditions. But, there is a note of caution. Such stocks are also subject to the highest risk if the market crashes.
Say for example, if the market offers a return of 20%, a stock with a beta of 3 will return 60%, which is overwhelming. By the same logic, if the market slips 20%, the stock will sink 60%, which is devastating. (Read: What is ‘Beta’?)
We have selected four high beta mutual funds whose percentage of net assets invested in common stocks is greater than 90%. Also, such funds have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
Funds have been selected over stocks, since funds reduce transaction costs for investors. Funds also diversify their portfolio without the numerous commission charges that stocks need to bear. (Read: The Advantages Of Mutual Funds)
Federated MDT Small Cap Growth A (QASGX - Free Report) invests a large portion of its net assets in small companies. QASGX’s beta is 1.23. QASGX’s 3-year and 5-year annualized returns are 9.1% and 10.3%, respectively. Annual expense ratio of 1.14% is lower than the category average of 1.42%.
Sterling Capital Mid Value A (OVEAX - Free Report) invests a major portion of its assets in the securities of middle capitalization companies. OVEAX’s beta is 1.14. OVEAX’s 3-year and 5-year annualized returns are 7.3% and 9.8%, respectively. Annual expense ratio of 1.2% is lower than the category average of 1.23%.
Fidelity Select Consumer Finance Portfolio (FSVLX - Free Report) invests the majority of its assets in securities of companies engaged in providing products and services associated with consumer finance. FSVLX’s beta is 1.02. FSVLX’s 3-year and 5-year annualized returns are 3.4% and 10.8%, respectively. Annual expense ratio of 0.89% is lower than the category average of 1.43%.
Fidelity Advisor Materials A (FMFAX - Free Report) invests a large portion of its assets in securities of companies engaged in the manufacture, mining, processing, or distribution of raw materials. FMFAX’s beta is 1.27. FMFAX’s 3-year and 5-year annualized returns are 2.4% and 3.7%, respectively. Annual expense ratio of 1.06% is lower than the category average of 1.4%.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Pick the best mutual funds with the help of Zacks Rank.
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Ride the Rally on These 4 High Beta Mutual Funds
Markets suffered a bloodbath after the Brexit stunner. But the losses were quickly recovered without much ado. Eventually, benchmarks continued to hit fresh highs at the end of almost every trading session this week. A slew of factors ranging from hints of fresh stimulus measures by Bank of England (BOE) and Bank of Japan (BOJ) to stronger-than-expected domestic earnings mostly led by JPMorgan Chase & Co. (JPM - Free Report) pushed stocks higher.
The uptick also came on the back of a strong June’s jobs report, while oil prices also recouped as markets gathered strength. Given this striking rally, risk loving investors would like to make the most of high beta mutual funds. Such funds are exposed to stocks that are poised to give even better returns than the broader markets due to the bullish sentiment.
S&P 500, Dow Close at Record High
The S&P 500 ended at an all-time high for the fourth consecutive session on Thursday, its longest such winning streak since Nov 2014. The S&P 500 rose 11.32 points or 0.5% to close at 2,163.75. The benchmark index had touched an intraday record high of 2,168.99. The Dow also touched its third record high in a row. The blue-chip index closed at 18,506.41, gaining 134.29 points, or 0.7%.
As indexes set records, market turbulence also ebbed. The CBOE Volatility Index (VIX) plunged almost 50% since reaching a four-month high on June 24. U.S. stocks bounced back after suffering from a serious case of “Brexit Blues.” Market pundits had cautioned that a Brexit will negatively affect the global economy and fuel volatility in world markets. So, what are the factors behind the continuous surge this week?
Fresh Stimulus Measures on the Cards
Even though the BOE kept its benchmark lending rates steady at 0.5%, the central bank did say that most of its members are expecting a loosening of policy in August. This reassured investors who were expecting further stimulus measures to stem the rot of an already reeling economy. Such an assurance supported a rally in riskier assets including stocks.
Equities also climbed as speculation grew that Japan’s Prime Minister Shinzo Abe is contemplating the so-called helicopter money in order to stimulate economic growth. In this case, the government issues non-marketable perpetual bonds with no maturity date, which the BOJ directly buys. This works as a tool to overcome deflation.
Upbeat Quarterly Earnings, JPM Shines
Better-than-expected results from large financial institutes, including JPMorgan, too powered the climb. JPMorgan’s second-quarter 2016 earnings of $1.55 per share handily outpaced the Zacks Consensus Estimate of $1.43. J.P. Morgan’s report in particular holds the promise of better results from banks and brokers in the coming days.
Companies like Alcoa (AA - Free Report) and Yum Brands (YUM - Free Report) from other sectors also came out with upbeat quarterly reports, suggesting some improvements in underlying fundamentals (read: Early Read on the Q2 Earnings Season).
Strong Economic Data Led by Jobs
But it was June’s robust jobs data that was primarily responsible for pushing stocks higher. The U.S. economy created a total of 287,000 jobs in June, significantly higher than the consensus estimate of 177,000. The domestic economy added higher-than-expected new jobs for the first time in the last four months.
Other major economic reports also suggest that the economy is on a solid footing. Manufacturing activity climbed to its highest level in June in almost 16 months, while the service sector index in the U.S. jumped to a seven-month high (read: 4 Mutual Funds to Ride Sturdy Manufacturing Data).
Producer price index also increased last month indicating a healthier level of inflation and growth. Additionally, household spending had increased in May, a sign that consumers are more optimistic about the economy.
4 High Beta Mutual Funds for Enticing Returns
Given this bullish sentiment, investors may invest in mutual funds that are mostly exposed to stocks having a high beta. This is because high beta (greater than 1) offers the possibility of higher returns than the market, especially in bullish conditions. But, there is a note of caution. Such stocks are also subject to the highest risk if the market crashes.
Say for example, if the market offers a return of 20%, a stock with a beta of 3 will return 60%, which is overwhelming. By the same logic, if the market slips 20%, the stock will sink 60%, which is devastating. (Read: What is ‘Beta’?)
We have selected four high beta mutual funds whose percentage of net assets invested in common stocks is greater than 90%. Also, such funds have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
Funds have been selected over stocks, since funds reduce transaction costs for investors. Funds also diversify their portfolio without the numerous commission charges that stocks need to bear. (Read: The Advantages Of Mutual Funds)
Federated MDT Small Cap Growth A (QASGX - Free Report) invests a large portion of its net assets in small companies. QASGX’s beta is 1.23. QASGX’s 3-year and 5-year annualized returns are 9.1% and 10.3%, respectively. Annual expense ratio of 1.14% is lower than the category average of 1.42%.
Sterling Capital Mid Value A (OVEAX - Free Report) invests a major portion of its assets in the securities of middle capitalization companies. OVEAX’s beta is 1.14. OVEAX’s 3-year and 5-year annualized returns are 7.3% and 9.8%, respectively. Annual expense ratio of 1.2% is lower than the category average of 1.23%.
Fidelity Select Consumer Finance Portfolio (FSVLX - Free Report) invests the majority of its assets in securities of companies engaged in providing products and services associated with consumer finance. FSVLX’s beta is 1.02. FSVLX’s 3-year and 5-year annualized returns are 3.4% and 10.8%, respectively. Annual expense ratio of 0.89% is lower than the category average of 1.43%.
Fidelity Advisor Materials A (FMFAX - Free Report) invests a large portion of its assets in securities of companies engaged in the manufacture, mining, processing, or distribution of raw materials. FMFAX’s beta is 1.27. FMFAX’s 3-year and 5-year annualized returns are 2.4% and 3.7%, respectively. Annual expense ratio of 1.06% is lower than the category average of 1.4%.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Pick the best mutual funds with the help of Zacks Rank.