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Buy 5 Mutual Funds as Unemployment Rate Falls to 10-Year Low
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After a poor show in the prior month, the U.S. economy experienced strong jobs growth in April. This in turn caused the unemployment rate to settle at its lowest level in the last 10 years. Moreover, steady gains in employment pushed workers’ pay higher, with average hourly wages increasing last month. A better-than-expected jobs report signals a rosier economy and a tighter labor market, both of which are expected to cement a rate hike in the Fed’s next policy meeting in June.
Job additions were mostly broad-based with sectors like leisure, health care, financial activities, mining and professional services witnessing strong job gains. In this context, we have focused on those mutual funds that have significant exposure to these sectors. But before that, let’s take a peek into the data.
Nonfarm Payrolls Post Gains in April
According to the U.S. Bureau of Labor Statistics, domestic non-farm payrolls increased 211,000 last month, making a strong rebound from March’s disappointing figure of 79,000. This was also significantly higher than the consensus estimate of 193,000 job additions.
Moreover, the unemployment rate declined from 4.5% in March to 4.4% in April, reaching its lowest level since May 2007. This also came in below the Fed’s projected level of 4.5% and raised rate hike possibilities for June even higher. Additionally, the unemployment rate is down 0.6% so far this year. Average hourly earnings rose by 7 cents to $26.1 last month, up 2.5% for the year.
Sectors that Experienced Job Gains
The leisure and hospitality sector created around 55,000 jobs in April and was the biggest contributor to last month’s job gains. Employment in food and drinking places increased by 26,000 last month and 260,000 from the year-ago figure. The professional and business services sector added around 39,000 jobs last month and 612,000 in the last 12 months.
Last month, healthcare and financial activities employment rose by 36,800 and 19,000, respectively.Further, the broader Health Care Select Sector SPDR (XLV) and Financial Select Sector SPDR (XLF) are up 10.2% and 2.5%, respectively, year to date. Additionally, employment for the mining sector advanced by 9,000 in April and created around 44,000 jobs after hitting its lowest level since October 2016.
Buy These 5 Sectoral Mutual Funds
Here, we have selected mutual funds, which have significant exposure to sectors that saw strong job additions in April. All these funds have a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy).Further, these funds have encouraging year-to-date (YTD) returns and minimum initial investment within $5000. Also, these funds have low expense ratios.
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.
Fidelity Select Consumer Discretionary Portfolio (FSCPX - Free Report) seeks growth of capital by investing mainly in common stocks. FSCPX invests the lion’s share of its assets in securities of companies, which are primarily involved in the manufacture and distributionof various consumer discretionary services. This non-diversified fund invests heavily in securities of both U.S. and non-U.S. companies.
The fund has a YTD return of 9.4% and an expense ratio of 0.76% compared with the category average of 1.34%. FSCPX has a Zacks Mutual Fund Rank #2. It includes two major leisure companies, Hilton Worldwide Holdings Inc. (HLT - Free Report) and Walt Disney Company (DIS - Free Report) in its top ten holdings.
Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) invests the majority of its assets in companies whose primary operations are related to software or information-based services. FSCSX primarily focuses on acquiring common stocks of both domestic and foreign companies. The fund uses fundamental analysis to select companies for investment purposes.
The fund has a YTD return of 17.8% and an expense ratio of 0.75% compared with the category average of 1.45%. FSCSX has a Zacks Mutual Fund Rank #2.
Fidelity Select Health Care Services Portfolio (FSHCX - Free Report) invests the majority of its assets in companies that either own or are involved in operating hospital and nursing homes, and are related to the healthcare services sector. FSHCX seeks appreciation of capital. The fund invests in securities of both U.S. and non-U.S. companies.
The fund has a YTD return of 10.4% and an expense ratio of 0.78% compared with the category average of 1.33%. FSHCX has a Zacks Mutual Fund Rank #2.
Fidelity Select Financial Services Portfolio (FIDSX - Free Report) invests the majority of its assets in common stocks of companies involved in offering financial services to industry and consumers. FIDSX seeks capital growth for the long run. Before investing in financial companies, the fund measures their industry position and financial condition.
The fund has a YTD return of 1.4% and an expense ratio of 0.76% compared with the category average of 1.51%. FIDSX has a Zacks Mutual Fund Rank #1.
Vanguard Precious Metals and Mining (VGPMX - Free Report) seeks growth of capital over the long term. VGPMX invests the majority of its assets in the stocks of both domestic and foreign companies, which are involved in mining, fabrication and distribution of minerals and metals. A maximum of 20% of its assets may be utilized to hold gold, silver or other precious metal in the form of bullion or coins.
The fund has a YTD return of 1.7% and an expense ratio of 0.43% compared with the category average of 1.40%. VGPMX has a Zacks Mutual Fund Rank #1.
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Buy 5 Mutual Funds as Unemployment Rate Falls to 10-Year Low
After a poor show in the prior month, the U.S. economy experienced strong jobs growth in April. This in turn caused the unemployment rate to settle at its lowest level in the last 10 years. Moreover, steady gains in employment pushed workers’ pay higher, with average hourly wages increasing last month. A better-than-expected jobs report signals a rosier economy and a tighter labor market, both of which are expected to cement a rate hike in the Fed’s next policy meeting in June.
Job additions were mostly broad-based with sectors like leisure, health care, financial activities, mining and professional services witnessing strong job gains. In this context, we have focused on those mutual funds that have significant exposure to these sectors. But before that, let’s take a peek into the data.
Nonfarm Payrolls Post Gains in April
According to the U.S. Bureau of Labor Statistics, domestic non-farm payrolls increased 211,000 last month, making a strong rebound from March’s disappointing figure of 79,000. This was also significantly higher than the consensus estimate of 193,000 job additions.
Moreover, the unemployment rate declined from 4.5% in March to 4.4% in April, reaching its lowest level since May 2007. This also came in below the Fed’s projected level of 4.5% and raised rate hike possibilities for June even higher. Additionally, the unemployment rate is down 0.6% so far this year. Average hourly earnings rose by 7 cents to $26.1 last month, up 2.5% for the year.
Sectors that Experienced Job Gains
The leisure and hospitality sector created around 55,000 jobs in April and was the biggest contributor to last month’s job gains. Employment in food and drinking places increased by 26,000 last month and 260,000 from the year-ago figure. The professional and business services sector added around 39,000 jobs last month and 612,000 in the last 12 months.
Last month, healthcare and financial activities employment rose by 36,800 and 19,000, respectively.Further, the broader Health Care Select Sector SPDR (XLV) and Financial Select Sector SPDR (XLF) are up 10.2% and 2.5%, respectively, year to date. Additionally, employment for the mining sector advanced by 9,000 in April and created around 44,000 jobs after hitting its lowest level since October 2016.
Buy These 5 Sectoral Mutual Funds
Here, we have selected mutual funds, which have significant exposure to sectors that saw strong job additions in April. All these funds have a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy).Further, these funds have encouraging year-to-date (YTD) returns and minimum initial investment within $5000. Also, these funds have low expense ratios.
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.
Fidelity Select Consumer Discretionary Portfolio (FSCPX - Free Report) seeks growth of capital by investing mainly in common stocks. FSCPX invests the lion’s share of its assets in securities of companies, which are primarily involved in the manufacture and distributionof various consumer discretionary services. This non-diversified fund invests heavily in securities of both U.S. and non-U.S. companies.
The fund has a YTD return of 9.4% and an expense ratio of 0.76% compared with the category average of 1.34%. FSCPX has a Zacks Mutual Fund Rank #2. It includes two major leisure companies, Hilton Worldwide Holdings Inc. (HLT - Free Report) and Walt Disney Company (DIS - Free Report) in its top ten holdings.
Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) invests the majority of its assets in companies whose primary operations are related to software or information-based services. FSCSX primarily focuses on acquiring common stocks of both domestic and foreign companies. The fund uses fundamental analysis to select companies for investment purposes.
The fund has a YTD return of 17.8% and an expense ratio of 0.75% compared with the category average of 1.45%. FSCSX has a Zacks Mutual Fund Rank #2.
Fidelity Select Health Care Services Portfolio (FSHCX - Free Report) invests the majority of its assets in companies that either own or are involved in operating hospital and nursing homes, and are related to the healthcare services sector. FSHCX seeks appreciation of capital. The fund invests in securities of both U.S. and non-U.S. companies.
The fund has a YTD return of 10.4% and an expense ratio of 0.78% compared with the category average of 1.33%. FSHCX has a Zacks Mutual Fund Rank #2.
Fidelity Select Financial Services Portfolio (FIDSX - Free Report) invests the majority of its assets in common stocks of companies involved in offering financial services to industry and consumers. FIDSX seeks capital growth for the long run. Before investing in financial companies, the fund measures their industry position and financial condition.
The fund has a YTD return of 1.4% and an expense ratio of 0.76% compared with the category average of 1.51%. FIDSX has a Zacks Mutual Fund Rank #1.
Vanguard Precious Metals and Mining (VGPMX - Free Report) seeks growth of capital over the long term. VGPMX invests the majority of its assets in the stocks of both domestic and foreign companies, which are involved in mining, fabrication and distribution of minerals and metals. A maximum of 20% of its assets may be utilized to hold gold, silver or other precious metal in the form of bullion or coins.
The fund has a YTD return of 1.7% and an expense ratio of 0.43% compared with the category average of 1.40%. VGPMX 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 >>