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Consumer Confidence Jumps to a 3-Month High: 3 Top Fund Picks

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The pandemic woes continuously dampened consumer confidence in the last few months. Notwithstanding the vaccine rollout, the Americans seemed worried about the economy’s health. However, things turned around in February as the government stepped up stimulus payments to American households and the new coronavirus cases dropped sharply.

On Feb 23, the Conference Board reported that the index of consumer confidence rose to a three-month high of 91.3 in February, surpassing the Zacks Consensus Estimate of 88.8. The figure for January was downwardly revised to 88.9. The government had handed more than a $600 worth stimulus package in January to the households along with higher unemployment sops for the jobless Americans. This was a major driver for the index to rise.

The survey showed that many Americans are planning to go on overseas vacations. However, only a few are planning to purchase homes, automobiles and other big-ticket items (like furniture, electronics, etc.) over the next six months.

Consumers remain hopeful that by this summer, more Americans will get vaccinated and there will be higher inflation as the government continues to provide fiscal relief. Additionally, the survey highlights that the consumers’ assessment of the labor market improved. The Present Situation Index, which is based on the consumers’ analysis of the current business and labor market conditions, climbed from 85.5 to 92 in February.

However, the time required to get rid of the pandemic is still uncertain and consumers’ anxiety prevails. Consumer sentiment is far below the pre-pandemic levels when the index had hit 132.6 last year. With the persistent decline in the number of cases related to the new COVID strains and the government’s fiscal grant in place, the rebound in consumer confidence seems a near possibility. Additionally, the Federal Reserve Chair Jerome Powell reported that the central bank will keep the interest rates low and continue pumping money into the economy through bond purchases until they make substantial progress toward achieving monetary goals.

3 Top Mutual Fund Picks

Rise in consumer confidence in February underlines the spending on luxury, leisure goods, new appliances and cars. Given such a positive outlook, we shortlisted three funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to grow. In addition, the minimum initial investment for these funds 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 the potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on the fund’s past performance but also on its likely future success.

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 the reasons for parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages and How They Make Investors Money).

Fidelity Select Retailing Portfolio (FSRPX - Free Report) fund aims for capital appreciation. This non-diversified fund invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.

This Sector - Other product has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned 24% and 20.2% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSRPX has a Zacks Mutual Fund Rank of 1 and an annual expense ratio of 0.74%, which is below the category average of 1.22%.

Fidelity Select Consumer Discretionary Portfolio (FSCPX - Free Report) fund aims for capital appreciation. This non-diversified fund invests majority of its assets in the common stocks of companies that are engaged in the manufacturing and distribution of consumer discretionary products and services.

This Zacks Sector – Other product has a history of positive total returns for more than 10 years. Specifically, FSCPX has returned 19.5% and 16.8% over the past three and five years, respectively. 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 Mutual Fund Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 1.22%.

Fidelity Select Leisure Portfolio (FDLSX - Free Report) fund aims at capital appreciation. This non-diversified fund normally invests majority of its assets in the common stocks of companies that are mostly engaged in the design, production or distribution of goods or services in the leisure industries.

This Zacks Sector – Other product has a history of positive total returns for more than 10 years. Specifically, FDLSX has returned 12.3% and 14.2% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDLSX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76%, which is below the category average of 1.22%.

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