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The robust employment data for the last month of 2018 boosted U.S. stock markets for a second session on Jan 7, following the equity market rally on Jan 3. The December jobs data by the Bureau of Labor Statistics is indicative of a higher number of job aspirants entering the workforce and increasing optimism over the labor market.
The uptick in new jobs fueled positive investor sentiment, which was also boosted by factors such as expectations of an affirmative U.S.-China trade deal. This encouraging jobs report not only drove away fears of an impending recession but also hinted at an expanding economy.
Therefore, it might be prudent to invest in a couple of sectors that can make the most of the stellar employment data.
Nonfarm Payrolls Post Gains, Wages Improve
Nonfarm payrolls added 312,000 new opportunities in December, surpassing significantly the consensus estimate of 183,000 job gains. Nonfarm payrolls increased by 2.6 million last year, higher than 2.2 million job additions in 2017.
Unemployment rate rose to 3.9% from a 49-year-low of 3.7% for a good reason, as 419,000 new workers joined the workforce. This was the result of an increase in labor force participation rate from 62.9% to 63.1%. Wages improved 0.4% on a monthly basis and registered an annualized increase of 3.2% in December. Average hourly earnings rose to $27.48, gaining 11 cents.
These Sectors Added Maximum New Jobs
Professional and business services
Professional and business services added 43,000 new jobs in December, surpassing any other sector in job gains. The industry added 583,000 new opportunities in 2018, up from 458,000 job additions in 2017.
Healthcare
The healthcare sector added 50,000 new jobs in December. Ambulatory healthcare services and hospitals added more than 38,000 and 7,000 jobs, respectively. Healthcare gained 346,000 jobs in 2018 against 284,000 employment additions the year before.
Food & Drinks
In December, food services, drinking outlets and restaurants etcetera added 41,000 jobs. The industry’s gains for the entirety of 2018, thus, came in at 235,000.
Construction
New jobs in construction soared by 38,000 last month. Civil and heavy engineering construction added more than 16,000 jobs and non-residential specialty trade construction added a similar number of opportunities. The industry added 280,000 new jobs in 2018 against 250,000 additions in the year before.
Manufacturing
This sector added 32,000 new opportunities in December. Durable goods component added the maximum number of new jobs totaling to 19,000, while non-durable goods component added 13,000.
4 Sectoral Mutual Funds to Buy
We have selected mutual funds from four sectors mentioned above. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three-year returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform 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).
Healthcare
Fidelity Select Portfolio Medical Technology And Devices (FSMEX - Free Report) seeks capital growth by investing 80% of its net assets in companies that are engaged in manufacture, distribution, supply or sale of medical devices, equipment and related technology. The fund carries a Zacks Mutual Fund Rank #1.
This Zacks sector – Health product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSMEX has an annual expense ratio of 0.75%, which is below the category average of 1.29%. The fund has three and five-year returns of 16.92% and 16.75%, respectively.
Consumer Discretionary (Food & Drinks)
Fidelity Select Consumer Discretionary (FSCPX - Free Report) seeks capital growth by investing 80% of its net assets in securities of companies that have operations in the consumer discretionary sector. The fund invests in U.S. and non-U.S. companies alike. FSCPX carries a Zacks Mutual Fund Rank #1.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSCPX has an annual expense ratio of 0.77%, which is below the category average of 1.35%. The fund has three and five-year returns of 8.06% and 7.95%, respectively.
Construction
T. Rowe Price Real Estate Fund (TRREX - Free Report) seeks capital growth by investing 80% of its net assets in real estate companies. This non-diversified fund usually invests in equity REITs. TRREX carries a Zacks Mutual Fund Rank #1.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TRREX has an annual expense ratio of 0.73%, which is below the category average of 1.21%. The fund has three and five-year returns of 0.25% and 6.50%, respectively.
Manufacturing
Fidelity Select Industrials (FCYIX - Free Report) seeks capital growth by investing 80% of its net assets in companies that are engaged in manufacture, distribution, supply or sale of industrial products, equipment or services. The fund carries a Zacks Mutual Fund Rank #1.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FCYIX has an annual expense ratio of 0.77%, which is below the category average of 1.18%. The fund has three and five-year returns of 8.51% and 7.33%, respectively.
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4 Mutual Funds to Gain From Strong Jobs Report
The robust employment data for the last month of 2018 boosted U.S. stock markets for a second session on Jan 7, following the equity market rally on Jan 3. The December jobs data by the Bureau of Labor Statistics is indicative of a higher number of job aspirants entering the workforce and increasing optimism over the labor market.
The uptick in new jobs fueled positive investor sentiment, which was also boosted by factors such as expectations of an affirmative U.S.-China trade deal. This encouraging jobs report not only drove away fears of an impending recession but also hinted at an expanding economy.
Therefore, it might be prudent to invest in a couple of sectors that can make the most of the stellar employment data.
Nonfarm Payrolls Post Gains, Wages Improve
Nonfarm payrolls added 312,000 new opportunities in December, surpassing significantly the consensus estimate of 183,000 job gains. Nonfarm payrolls increased by 2.6 million last year, higher than 2.2 million job additions in 2017.
Unemployment rate rose to 3.9% from a 49-year-low of 3.7% for a good reason, as 419,000 new workers joined the workforce. This was the result of an increase in labor force participation rate from 62.9% to 63.1%. Wages improved 0.4% on a monthly basis and registered an annualized increase of 3.2% in December. Average hourly earnings rose to $27.48, gaining 11 cents.
These Sectors Added Maximum New Jobs
Professional and business services
Professional and business services added 43,000 new jobs in December, surpassing any other sector in job gains. The industry added 583,000 new opportunities in 2018, up from 458,000 job additions in 2017.
Healthcare
The healthcare sector added 50,000 new jobs in December. Ambulatory healthcare services and hospitals added more than 38,000 and 7,000 jobs, respectively. Healthcare gained 346,000 jobs in 2018 against 284,000 employment additions the year before.
Food & Drinks
In December, food services, drinking outlets and restaurants etcetera added 41,000 jobs. The industry’s gains for the entirety of 2018, thus, came in at 235,000.
Construction
New jobs in construction soared by 38,000 last month. Civil and heavy engineering construction added more than 16,000 jobs and non-residential specialty trade construction added a similar number of opportunities. The industry added 280,000 new jobs in 2018 against 250,000 additions in the year before.
Manufacturing
This sector added 32,000 new opportunities in December. Durable goods component added the maximum number of new jobs totaling to 19,000, while non-durable goods component added 13,000.
4 Sectoral Mutual Funds to Buy
We have selected mutual funds from four sectors mentioned above. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three-year returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform 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).
Healthcare
Fidelity Select Portfolio Medical Technology And Devices (FSMEX - Free Report) seeks capital growth by investing 80% of its net assets in companies that are engaged in manufacture, distribution, supply or sale of medical devices, equipment and related technology. The fund carries a Zacks Mutual Fund Rank #1.
This Zacks sector – Health product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSMEX has an annual expense ratio of 0.75%, which is below the category average of 1.29%. The fund has three and five-year returns of 16.92% and 16.75%, respectively.
Consumer Discretionary (Food & Drinks)
Fidelity Select Consumer Discretionary (FSCPX - Free Report) seeks capital growth by investing 80% of its net assets in securities of companies that have operations in the consumer discretionary sector. The fund invests in U.S. and non-U.S. companies alike. FSCPX carries a Zacks Mutual Fund Rank #1.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSCPX has an annual expense ratio of 0.77%, which is below the category average of 1.35%. The fund has three and five-year returns of 8.06% and 7.95%, respectively.
Construction
T. Rowe Price Real Estate Fund (TRREX - Free Report) seeks capital growth by investing 80% of its net assets in real estate companies. This non-diversified fund usually invests in equity REITs. TRREX carries a Zacks Mutual Fund Rank #1.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TRREX has an annual expense ratio of 0.73%, which is below the category average of 1.21%. The fund has three and five-year returns of 0.25% and 6.50%, respectively.
Manufacturing
Fidelity Select Industrials (FCYIX - Free Report) seeks capital growth by investing 80% of its net assets in companies that are engaged in manufacture, distribution, supply or sale of industrial products, equipment or services. The fund carries a Zacks Mutual Fund Rank #1.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FCYIX has an annual expense ratio of 0.77%, which is below the category average of 1.18%. The fund has three and five-year returns of 8.51% and 7.33%, respectively.
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 >>