Fears of a recession were already hurting markets that saw all major indexes ending in the red for Feb. Worries escalated earlier this month, when Fed Chair Jerome Powell gave a hawkish outlook on rising inflation that will probably compel the central bank to keep raising interest rates at an aggressive pace.

If this was not enough, the collapse of Silicon Valley Bank, which mostly finances tech firms, further rattled the U.S. financial sector. Since then, things have only worsened, with the Federal Deposit Insurance Corporation taking over the charges of the bank and Wall Street continuing to bleed.

However, consumer staple funds are safe bets, given that they are unlikely to be affected by this market volatility. Thus, funds likeFidelity Advisor Consumer Staples Fund Class A (FDAGX Quick QuoteFDAGX - Free Report) , Fidelity Select Consumer Staples Portfolio (FDFAX Quick QuoteFDFAX - Free Report) and Fidelity Select Consumer Staples Portfolio Class C  (FDCGX Quick QuoteFDCGX - Free Report) are likely to benefit in the near term.

Consumer Staples a Safe Bet

Market volatility is likely to continue as investors’ confidence has taken a bad blow owing to multiple reasons. The best course of action in this circumstance would be to invest in the defensive sector, like consumer staples and utilities.

The consumer staples sector is fundamentally strong and mature as demand is often resilient to changes in the economic cycle. Companies in this sector primarily sell everyday goods. Hence, they are defensive in nature.

Although retail sales declined marginally by 0.4% in February after rising a solid 3.2% in January, sales of consumer staples are unlikely to be affected. Given that consumer staples comprise products that are basic necessities, consumers cannot cut down on spending on this segment, unlike discretionary items.

Also, inflation is still at a multi-decade high, although it has shown some signs of easing by the end of 2022. The Personal Consumption Expenditure (PCE) index, the Fed's preferred monetary policy indicator, climbed significantly by 0.6% in January after rising 0.2% the prior month. PCE rose 5.4% year over year in January.

This has once again raised fears that the Fed will continue to raise interest rates steeply and for a longer period than expected earlier in order to tame surging inflation.

However, people will continue to spend on consumer staples, despite rising prices. Consumer staple funds are unlikely to be impacted by market volatility.

The sector is known for its consistency and transparency in cash flow and profitability.

3 Best Choices

We have selected three mutual funds with significant exposure to the consumer staples sector that carries a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three and five-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 fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also 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 Advisor Consumer Staples Fund Class A aims for capital growth. FDAGX invests the majority of its assets in securities of companies that manufacture and market consumer staples products. Fidelity Advisor Consumer Staples Fund Class A primarily invests in common stocks of companies.

Fidelity Advisor Consumer Staples Fund Class A has a history of positive total returns for more than 10 years. Specifically, FDAGX has returned nearly 10.7% and 7.5% over the past three and five-year periods, respectively. FDAGX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Consumer Staples Portfolio fund aims for capital growth. FDFAX invests the majority of assets in securities of companies primarily engaged in manufacturing, marketing or distribution of consumer staples products. Fidelity Select Consumer Staples Portfolio fund invests in both U.S. and non-U.S. issuers.

Fidelity Select Consumer Staples Portfolio has a history of positive total returns for more than 10 years. Specifically, FDFAX has returned 11.1% and 7.8% over the past three and five years, respectively. FDFAX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Consumer Staples Portfolio Class C fund invests the majority of its assets in securities of companies whose primary business is the production, sale, or distribution of consumer goods. FDCGX makes investments in both domestic and overseas issuers.

Fidelity Select Consumer Staples Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FDCGX has returned nearly 9.9% and 6.7% over the past three and five-year periods, respectively. FDCGX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

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