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Inflation Grows at Fastest Pace Since 2008: 4 Safe Fund Picks
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On May 12, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 0.8% in April, much higher than the consensus estimate of a 0.2% rise. In fact, the index which measures a basket of goods and includes energy and housing costs has risen 4.2% from a year earlier. Inflation has accelerated at the fastest pace in about 13 years and with the U.S. economy recovering from the pandemic, prices have jumped higher than expected.
Core CPI that excludes volatile food and energy prices has increased 0.9% in April, surpassing the consensus estimate of a 0.3% rise. Monthly gain in core inflation was the largest since 1981 in the last month and is 2.6% higher than the same period last year. There has been a 25% rise in energy prices from a year ago and bottlenecks in supply due to a number of factors that have been the prime reason behind the rise in price. Businesses are struggling to keep up with demand, supply chain bottlenecks tied to the pandemic while short supply of chips has held up production of new automobiles and other electronic goods.
Additionally, the Labor Department reported that the country crossed 8 million job openings in March for the first time ever. However, the country only added 266,000 jobs in April which suggests that employers are struggling to find qualified workers. Shortage of labor and supply of raw materials has led to rise in prices.
Investors have been skeptical regarding the pick-up in inflation this month and markets have been volatile. Major indexes have ended sessions in either high highs or low lows but the inflation data instilled fear and led to massive sell-offs. Wall Street’s fear gauge VIX also jumped to 27.59 and technology shares suffered the most as investors reevaluated their high valuation.
Given the current scenario and tracing the path the U.S. economy is heading toward, it looks that inflation may continue to rise. Hence, investors should consider safe-haven options like gold and utilities which stand a better chance during this downturn. While these safe haven options lag in gains compared to cyclical sectors, including energy, they offer better safety than technology and other growth stocks in present times.
4 Mutual Fund Picks
Hence, we have shortlisted four safe-haven mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). 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 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 Utilities Portfolio (FSUTX - Free Report) aims for capital appreciation. This non-diversified fund invests majority of assets in common stocks of companies primarily engaged in the utilities industry and companies generating most of their revenues from utility operations.
This Zacks Sector – Utilities has a history of positive total returns for more than 10 years. Specifically, FSUTX has returned 11.3% and 11.5% in the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSUTX, a Zacks Mutual Fund Rank #1 fund, has an annual expense ratio of 0.75%, which is below the category average of 0.95%.
Franklin Utilities Fund Class A1 (FKUTX - Free Report) aims to provide capital appreciation and current income. The fund invests majority of assets in equity securities of utilities companies that provide electricity, natural gas, water and communications services to the public and companies.
This Zacks Sector – Utilities has a history of positive total returns for more than 10 years. Specifically, FKUTX has returned 11.9% and 9.7% in the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FKUTX, a Zacks Mutual Fund Rank #1 fund, has an annual expense ratio of 0.73%, which is below the category average of 0.95%.
Invesco Gold & Special Minerals Fund Class Y (OGMYX - Free Report) aims for capital appreciation. The fund invests majority of assets in common stocks of companies that are engaged in mining, processing or dealing in gold or other metals or minerals. The non-diversified fund may also invest in gold bullion, other physical metals and precious metals-related ETFs.
This Zacks sector - Precious Metal product has a history of positive total returns for more than 10 years. Specifically, OGMYX has returned 22.8% and 11.9% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
OGMYX has a Zacks Mutual Fund Rank of #1 and an annual expense ratio of 0.96%, which is below the category average of 1.18%.
Franklin Gold and Precious Metals Fund Class A (FKRCX - Free Report) aims for capital appreciation and current income is a secondary consideration. This non-diversified fund invests majority of assets in securities of gold and precious metals operation companies located globally.
This Zacks sector - Precious Metal product has a history of positive total returns for more than 10 years. Specifically, FKRCX has returned 23.3% and nearly 8% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FKRCX has a Zacks Mutual Fund Rank of #2 and an annual expense ratio of 0.93%, which is below the category average of 1.37%.
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Inflation Grows at Fastest Pace Since 2008: 4 Safe Fund Picks
On May 12, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 0.8% in April, much higher than the consensus estimate of a 0.2% rise. In fact, the index which measures a basket of goods and includes energy and housing costs has risen 4.2% from a year earlier. Inflation has accelerated at the fastest pace in about 13 years and with the U.S. economy recovering from the pandemic, prices have jumped higher than expected.
Core CPI that excludes volatile food and energy prices has increased 0.9% in April, surpassing the consensus estimate of a 0.3% rise. Monthly gain in core inflation was the largest since 1981 in the last month and is 2.6% higher than the same period last year. There has been a 25% rise in energy prices from a year ago and bottlenecks in supply due to a number of factors that have been the prime reason behind the rise in price. Businesses are struggling to keep up with demand, supply chain bottlenecks tied to the pandemic while short supply of chips has held up production of new automobiles and other electronic goods.
Additionally, the Labor Department reported that the country crossed 8 million job openings in March for the first time ever. However, the country only added 266,000 jobs in April which suggests that employers are struggling to find qualified workers. Shortage of labor and supply of raw materials has led to rise in prices.
Investors have been skeptical regarding the pick-up in inflation this month and markets have been volatile. Major indexes have ended sessions in either high highs or low lows but the inflation data instilled fear and led to massive sell-offs. Wall Street’s fear gauge VIX also jumped to 27.59 and technology shares suffered the most as investors reevaluated their high valuation.
Given the current scenario and tracing the path the U.S. economy is heading toward, it looks that inflation may continue to rise. Hence, investors should consider safe-haven options like gold and utilities which stand a better chance during this downturn. While these safe haven options lag in gains compared to cyclical sectors, including energy, they offer better safety than technology and other growth stocks in present times.
4 Mutual Fund Picks
Hence, we have shortlisted four safe-haven mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). 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 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 Utilities Portfolio (FSUTX - Free Report) aims for capital appreciation. This non-diversified fund invests majority of assets in common stocks of companies primarily engaged in the utilities industry and companies generating most of their revenues from utility operations.
This Zacks Sector – Utilities has a history of positive total returns for more than 10 years. Specifically, FSUTX has returned 11.3% and 11.5% in the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSUTX, a Zacks Mutual Fund Rank #1 fund, has an annual expense ratio of 0.75%, which is below the category average of 0.95%.
Franklin Utilities Fund Class A1 (FKUTX - Free Report) aims to provide capital appreciation and current income. The fund invests majority of assets in equity securities of utilities companies that provide electricity, natural gas, water and communications services to the public and companies.
This Zacks Sector – Utilities has a history of positive total returns for more than 10 years. Specifically, FKUTX has returned 11.9% and 9.7% in the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FKUTX, a Zacks Mutual Fund Rank #1 fund, has an annual expense ratio of 0.73%, which is below the category average of 0.95%.
Invesco Gold & Special Minerals Fund Class Y (OGMYX - Free Report) aims for capital appreciation. The fund invests majority of assets in common stocks of companies that are engaged in mining, processing or dealing in gold or other metals or minerals. The non-diversified fund may also invest in gold bullion, other physical metals and precious metals-related ETFs.
This Zacks sector - Precious Metal product has a history of positive total returns for more than 10 years. Specifically, OGMYX has returned 22.8% and 11.9% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
OGMYX has a Zacks Mutual Fund Rank of #1 and an annual expense ratio of 0.96%, which is below the category average of 1.18%.
Franklin Gold and Precious Metals Fund Class A (FKRCX - Free Report) aims for capital appreciation and current income is a secondary consideration. This non-diversified fund invests majority of assets in securities of gold and precious metals operation companies located globally.
This Zacks sector - Precious Metal product has a history of positive total returns for more than 10 years. Specifically, FKRCX has returned 23.3% and nearly 8% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FKRCX has a Zacks Mutual Fund Rank of #2 and an annual expense ratio of 0.93%, which is below the category average of 1.37%.
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 >>