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4 Financial Mutual Funds to Buy as Yellen Remains Hawkish
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Federal Reserve Chair Janet Yellen left open the possibility of a rate hike as early as the central bank’s next policy meeting in March, courtesy of the healthy rise in job creation and inflation.
She reiterated some of the points made in the Fed’s last policy meeting while indicating that she is concerned about the possibility of holding off a rate hike for too long.With rate hike possibilities around the corner, financial mutual fund investments are likely to prove profitable.
Rate Hike in the Cards
Yellen confirmed that an interest rate hike in March is still on the table. Citing an improving economy and solid labor market, she noted that waiting too long would be imprudent as it might hamper the broader financial markets and mar economic growth. Yellen expects a gradual rate increase amid a modestly expanding economy and inflation that should touch the Fed’s desired target rate of 2% in the near term.
Job additions increased significantly in January, with the economy adding 227,000 jobs, higher than 157,000 added during December. Additionally, this was the best monthly job rise since September. Wage gains are also likely to pick up momentum as minimum wage norms begin to take effect. The new administration’s policies will also provide a fillip to wage increases.
A measure of U.S. inflation expectations, in the meantime, rose for a second straight month in January to its highest level since mid-2015, according to a Federal Reserve Bank of New York survey. The survey of consumer expectations, an increasingly influential gauge of prices for the U.S. central bank, figured out that inflation expectations increased to 3% last month from 2.8% in December and 2.5% in November.
Financials Benefit
As Yellen signaled that the central bank could gradually raise interest rates sooner rather than later, financial stocks lead the gains. Bank stocks rallied on Yellen’s hawkish comments. Higher longer-term interest rates can boost bank profits as they increase the spread between what banks earn by funding longer-term assets, such as loans, with shorter-term liabilities.
Shares of non-banking financial institutions including insurance companies, asset managers and brokerage firms also moved north. A rise in rates will enable insurance firms to invest in higher yielding government securities, thereby leading to greater returns, while brokerage firms and asset managers benefit immensely from rising-rate environments since an increase in rates generally concur with periods of economic strength and investor enthusiasm (read more: Which Investments Could Benefit From Rising Interest Rates?)
4 Financial Mutual Funds to Buy Now
Higher interest rates and lighter regulations are expected to help financial companies rake in huge profits. We have chosen four mutual funds having exposure to the financial sector that possess a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive 3-year and 5-year annualized returns, minimum initial investments within $5000 and low expense ratios.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why investors should park their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Advisor Financial Services A (FAFDX - Free Report) invests the majority of its assets in securities of companies principally engaged in providing financial services to consumers. The fund’s 3-year and 5-year annualized returns are 10.2% and 13.5%, respectively. Its annual expense ratio of 1.15% lags the category average of 1.52%. FAFDX has a Zacks Mutual Fund Rank #1.
Emerald Banking and Finance Investor (FFBFX - Free Report) invests a large portion of its assets in stocks of companies principally engaged in the banking or financial services industries.The fund’s 3-year and 5-year annualized returns are 17.8% and 21.4%, respectively. Its annual expense ratio of 1.48% is below the category average of 1.52%. FFBFX has a Zacks Mutual Fund Rank #1.
JHancock Regional Bank A (FRBAX - Free Report) invests the majority of its assets in stocks of regional banks and other lending companies, including commercial and industrial banks, savings and loans associations and bank holding companies. The fund’s 3-year and 5-year annualized returns are 18.9% and 20.6%, respectively. Its annual expense ratio of 1.27% is lower than the category average of 1.52%. FRBAX has a Zacks Mutual Fund Rank #2.
Fidelity Select Insurance Portfolio (FSPCX - Free Report) invests a large portion of its assets in securities of companies principally engaged in underwriting, reinsuring, selling, distributing, and placing insurance. The fund’s 3-year and 5-year annualized returns are 13.4% and 17.1%, respectively. Its annual expense ratio of 0.8% is below the category average of 1.52%. FSPCX has a Zacks Mutual Fund Rank #1.
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4 Financial Mutual Funds to Buy as Yellen Remains Hawkish
Federal Reserve Chair Janet Yellen left open the possibility of a rate hike as early as the central bank’s next policy meeting in March, courtesy of the healthy rise in job creation and inflation.
She reiterated some of the points made in the Fed’s last policy meeting while indicating that she is concerned about the possibility of holding off a rate hike for too long.With rate hike possibilities around the corner, financial mutual fund investments are likely to prove profitable.
Rate Hike in the Cards
Yellen confirmed that an interest rate hike in March is still on the table. Citing an improving economy and solid labor market, she noted that waiting too long would be imprudent as it might hamper the broader financial markets and mar economic growth. Yellen expects a gradual rate increase amid a modestly expanding economy and inflation that should touch the Fed’s desired target rate of 2% in the near term.
Job additions increased significantly in January, with the economy adding 227,000 jobs, higher than 157,000 added during December. Additionally, this was the best monthly job rise since September. Wage gains are also likely to pick up momentum as minimum wage norms begin to take effect. The new administration’s policies will also provide a fillip to wage increases.
A measure of U.S. inflation expectations, in the meantime, rose for a second straight month in January to its highest level since mid-2015, according to a Federal Reserve Bank of New York survey. The survey of consumer expectations, an increasingly influential gauge of prices for the U.S. central bank, figured out that inflation expectations increased to 3% last month from 2.8% in December and 2.5% in November.
Financials Benefit
As Yellen signaled that the central bank could gradually raise interest rates sooner rather than later, financial stocks lead the gains. Bank stocks rallied on Yellen’s hawkish comments. Higher longer-term interest rates can boost bank profits as they increase the spread between what banks earn by funding longer-term assets, such as loans, with shorter-term liabilities.
Shares of non-banking financial institutions including insurance companies, asset managers and brokerage firms also moved north. A rise in rates will enable insurance firms to invest in higher yielding government securities, thereby leading to greater returns, while brokerage firms and asset managers benefit immensely from rising-rate environments since an increase in rates generally concur with periods of economic strength and investor enthusiasm (read more: Which Investments Could Benefit From Rising Interest Rates?)
4 Financial Mutual Funds to Buy Now
Higher interest rates and lighter regulations are expected to help financial companies rake in huge profits. We have chosen four mutual funds having exposure to the financial sector that possess a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive 3-year and 5-year annualized returns, minimum initial investments within $5000 and low expense ratios.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why investors should park their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Advisor Financial Services A (FAFDX - Free Report) invests the majority of its assets in securities of companies principally engaged in providing financial services to consumers. The fund’s 3-year and 5-year annualized returns are 10.2% and 13.5%, respectively. Its annual expense ratio of 1.15% lags the category average of 1.52%. FAFDX has a Zacks Mutual Fund Rank #1.
Emerald Banking and Finance Investor (FFBFX - Free Report) invests a large portion of its assets in stocks of companies principally engaged in the banking or financial services industries.The fund’s 3-year and 5-year annualized returns are 17.8% and 21.4%, respectively. Its annual expense ratio of 1.48% is below the category average of 1.52%. FFBFX has a Zacks Mutual Fund Rank #1.
JHancock Regional Bank A (FRBAX - Free Report) invests the majority of its assets in stocks of regional banks and other lending companies, including commercial and industrial banks, savings and loans associations and bank holding companies. The fund’s 3-year and 5-year annualized returns are 18.9% and 20.6%, respectively. Its annual expense ratio of 1.27% is lower than the category average of 1.52%. FRBAX has a Zacks Mutual Fund Rank #2.
Fidelity Select Insurance Portfolio (FSPCX - Free Report) invests a large portion of its assets in securities of companies principally engaged in underwriting, reinsuring, selling, distributing, and placing insurance. The fund’s 3-year and 5-year annualized returns are 13.4% and 17.1%, respectively. Its annual expense ratio of 0.8% is below the category average of 1.52%. FSPCX 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 >>