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Per the latest report from the Commerce Department, U.S. GDP for the fourth quarter advanced at a 2.9% annual rate of growth. Such astounding growth was achieved on the back increased consumer as well as business spending. Further, the economy expanded at 2.3% throughout 2017 compared with 1.5% growth, which was achieved in 2016. Also, after-tax corporate profits surged 1.7% in the same period.
Taking these bullish factors into account, we suggest you place your bet on mutual funds invested in consumer discretionary, transportation and construction stocks.
Consumer Spending the Highest in 3 Years
Consumer spending, which accounts for almost 70% of the U.S. GDP, rose 4% in the last three months of 2017. This marked its best rate of increase since the last quarter of 2014. The data also exceeded a 2.2% growth rate in the third quarter of 2017. Such an increase was achieved on the back of higher disbursement on leisure transportation such as air travel.
The uptick in consumer spending also negated the impact of a surge in trade deficit, which hit a nine-year high on the back of a rise in imports. U.S. imports increased at their quickest rate since the third quarter of 2010, weighing heavily on GDP, cutting off 1.2 points.
Moreover, the inventory investment surged $15.6 billion in the fourth quarter, slicing off 0.5 percentage points from GDP. However, the negative impacts of both trade deficit and inventory buildup was countered by a steep rise in consumer spending.
Business Investment and Government Spending Also Boost GDP
U.S. GDP was also boosted by a stupendous increase in business investment in equipment as well as construction and infrastructure. Outlays on construction of office buildings and drilling platforms surged 6.3%. Also, spending on homebuilding increased 12.8% in the fourth quarter of 2017. Further, growth in business investment in equipment increased 11.6%, its highest level since the third quarter of 2014.
Government spending rose 3% in the final three months of 2017 to log its strongest rate of growth since the second quarter of 2015. Meanwhile, gross domestic income (GDI) expanded 0.9% in the fourth quarter. Also, the average of GDP and GDI, which is treated as a better measure of economic activity, gained 1.9% in the same period.
5 Best Funds to Buy Now
Given such positives, we have highlighted five mutual funds investing in consumer discretionary, business equipment, transportation and construction stocks. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and one-year returns. Additionally, the minimum initial investment is within $5000.
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.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Industrials Fund (FCYIX - Free Report) seeks capital appreciation. FCYIX normally invests at least 80% of its assets in common stocks of companies principally engaged in the research, development, manufacture, distribution, supply, or sale of materials, equipment, products, or services related to cyclical industries.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 9.9% over the three-year and 13.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FCYIX has a Zacks Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.29%.
Principal Real Estate Securities R5 (PREPX - Free Report) seeks growth of total returns. PREPX invests the lion’s share of its assets in equity securities of real estate companies. The fund focuses on value equity securities.
This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund has returned 1.8% over the three-year and 7.7% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
PREPX has an annual expense ratio of 1.07%, which is below the category average of 1.23%.
John Hancock II Real Estate Securities 1 (JIREX - Free Report) seeks appreciation of capital and income over the long term. JIREX invests primarily in equity securities of companies engaged in operations related to the real estate sector, which also include REITs. The fund invests in securities including common stock, preferred stock and convertible securities. It may invest a maximum of 10% of its assets in securities of companies domiciled outside the U.S. territory.
This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund has returned 0.7% over the three-year and 6% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
JIREX has an annual expense ratio of 0.79%, which is below the category average of 1.23%.
Fidelity Select Transportation (FSRFX - Free Report) seeks capital growth. FSRFX invests the majority of its assets in securities of companies involved in the design, manufacture and sale of transportation equipment and provide transportation services. The non-diversified fund invests in both U.S. and non-U.S. companies.
This Sector – Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 6.8% over the three-year and 16.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSRFX has a Zacks Rank #2 and an annual expense ratio of 0.82%, which is below the category average of 1.29%.
Fidelity Select Consumer Discretionary Portfolio Fund (FSCPX - Free Report) invests in large blend companies. The objective of FSCPX is to seek capital appreciation. FSCPX normally invests at least 80% of its assets in common stocks of companies principally engaged in the manufacture and distribution of goods and services to both domestic and international consumers.
This Sector – Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 10.5% over the three-year and 15.4% over the five-year benchmarks. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSCPX has a Zacks Rank #2 and an annual expense ratio of 0.76%, which is below the category average of 1.35%.
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5 Funds to Benefit From Robust GDP Growth
Per the latest report from the Commerce Department, U.S. GDP for the fourth quarter advanced at a 2.9% annual rate of growth. Such astounding growth was achieved on the back increased consumer as well as business spending. Further, the economy expanded at 2.3% throughout 2017 compared with 1.5% growth, which was achieved in 2016. Also, after-tax corporate profits surged 1.7% in the same period.
Taking these bullish factors into account, we suggest you place your bet on mutual funds invested in consumer discretionary, transportation and construction stocks.
Consumer Spending the Highest in 3 Years
Consumer spending, which accounts for almost 70% of the U.S. GDP, rose 4% in the last three months of 2017. This marked its best rate of increase since the last quarter of 2014. The data also exceeded a 2.2% growth rate in the third quarter of 2017. Such an increase was achieved on the back of higher disbursement on leisure transportation such as air travel.
The uptick in consumer spending also negated the impact of a surge in trade deficit, which hit a nine-year high on the back of a rise in imports. U.S. imports increased at their quickest rate since the third quarter of 2010, weighing heavily on GDP, cutting off 1.2 points.
Moreover, the inventory investment surged $15.6 billion in the fourth quarter, slicing off 0.5 percentage points from GDP. However, the negative impacts of both trade deficit and inventory buildup was countered by a steep rise in consumer spending.
Business Investment and Government Spending Also Boost GDP
U.S. GDP was also boosted by a stupendous increase in business investment in equipment as well as construction and infrastructure. Outlays on construction of office buildings and drilling platforms surged 6.3%. Also, spending on homebuilding increased 12.8% in the fourth quarter of 2017. Further, growth in business investment in equipment increased 11.6%, its highest level since the third quarter of 2014.
Government spending rose 3% in the final three months of 2017 to log its strongest rate of growth since the second quarter of 2015. Meanwhile, gross domestic income (GDI) expanded 0.9% in the fourth quarter. Also, the average of GDP and GDI, which is treated as a better measure of economic activity, gained 1.9% in the same period.
5 Best Funds to Buy Now
Given such positives, we have highlighted five mutual funds investing in consumer discretionary, business equipment, transportation and construction stocks. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and one-year returns. Additionally, the minimum initial investment is within $5000.
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.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Industrials Fund (FCYIX - Free Report) seeks capital appreciation. FCYIX normally invests at least 80% of its assets in common stocks of companies principally engaged in the research, development, manufacture, distribution, supply, or sale of materials, equipment, products, or services related to cyclical industries.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 9.9% over the three-year and 13.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FCYIX has a Zacks Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.29%.
Principal Real Estate Securities R5 (PREPX - Free Report) seeks growth of total returns. PREPX invests the lion’s share of its assets in equity securities of real estate companies. The fund focuses on value equity securities.
This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund has returned 1.8% over the three-year and 7.7% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
PREPX has an annual expense ratio of 1.07%, which is below the category average of 1.23%.
John Hancock II Real Estate Securities 1 (JIREX - Free Report) seeks appreciation of capital and income over the long term. JIREX invests primarily in equity securities of companies engaged in operations related to the real estate sector, which also include REITs. The fund invests in securities including common stock, preferred stock and convertible securities. It may invest a maximum of 10% of its assets in securities of companies domiciled outside the U.S. territory.
This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund has returned 0.7% over the three-year and 6% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
JIREX has an annual expense ratio of 0.79%, which is below the category average of 1.23%.
Fidelity Select Transportation (FSRFX - Free Report) seeks capital growth. FSRFX invests the majority of its assets in securities of companies involved in the design, manufacture and sale of transportation equipment and provide transportation services. The non-diversified fund invests in both U.S. and non-U.S. companies.
This Sector – Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 6.8% over the three-year and 16.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSRFX has a Zacks Rank #2 and an annual expense ratio of 0.82%, which is below the category average of 1.29%.
Fidelity Select Consumer Discretionary Portfolio Fund (FSCPX - Free Report) invests in large blend companies. The objective of FSCPX is to seek capital appreciation. FSCPX normally invests at least 80% of its assets in common stocks of companies principally engaged in the manufacture and distribution of goods and services to both domestic and international consumers.
This Sector – Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 10.5% over the three-year and 15.4% over the five-year benchmarks. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSCPX has a Zacks Rank #2 and an annual expense ratio of 0.76%, which is below the category average of 1.35%.
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 >>