U.S. consumer confidence made a solid rebound in May, as inflation finally started showing signs of easing. The Conference Board reported on Jun 27 that consumer confidence jumped to 109.7 in June from May’s reading of 102.5 and surpassed analysts’ expectations of a reading of 104.

This is also the highest reading since January 2022, indicating that consumers are a lot relieved now as the Fed has finally decided to halt its interest rate hikes after increasing it by 500 basis points since March 2022.

The Fed has indicated that it needs to hike interest rates at least two more times this year by 25 basis points each, which has reignited fears among many that this might push the economy into a recession. However, there are several others who believe that the economy may have a softer landing than was expected some time ago.

The survey also showed that consumers’ expectations for 12-month inflation dropped to 6% in June from 6.1% in May. This is the lowest reading since the end of 2020.

Also, the Expectations Index, which indicates consumers’ outlook for business, income and labor market conditions over the next six months, also climbed to an impressive 79.3 in June from May’s reading of 71.5. This is also the highest level in more than a year.

The Present Situation Index, which shows consumers’ assessment of the present business and labor market scenario, rose to 155.3 in June from 148.9 in the prior month.

Besides, personal spending has been rising. The Bureau of Economic Analysis reported on Jun 30 that personal income increased 0.4% or $91.2 billion in May. Disposable personal income, which excluded personal taxes, increased 0.4% or $86.7 billion in May.

With personal income rising and consumer confidence rebounding, people are a lot more relaxed about the economy’s health now. Given this scenario, people can bet on some top-ranked retail and consumer discretionary funds like Fidelity Select Consumer Staples Portfolio (FDCGX Quick QuoteFDCGX - Free Report) , Fidelity Select Retailing Portfolio (FSRPX Quick QuoteFSRPX - Free Report) and Fidelity Select Consumer Staples Portfolio (FDIGX Quick QuoteFDIGX - Free Report) .

3 Best Choices

We have, thus, selected three mutual funds with significant exposure to the retail and consumer discretionary sector carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy) that are poised to gain from such 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 in identifying 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 Consumer Staples Portfolio 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 10% and 8.7% over the past three and five-year periods, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDCGX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.73%, which is below the category average of 0.76%.

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

Fidelity Select Retailing Portfolio has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 6.1% and nearly 8.6% over the past three and five-year periods, 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 #2 and an annual expense ratio of 0.72%, which is below the category average of 0.79%.

Fidelity Select Consumer Staples Portfolio fund aims at capital appreciation. FDIGX invests its assets in the common stock of companies engaged in the manufacture, sale, or distribution of consumer staples.

Fidelity Select Consumer Staples Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FDIGX has returned nearly 11.1% and nearly 9.9% over the past three and five-year periods, respectively.

FDIGX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.73%, which is below the category average of 0.79%. 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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