We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Utility Funds to Buy as Consumer Sentiment Declines in January
Read MoreHide Full Article
Rising inflation and a robust labor market have sparked worries about the Federal Reserve's future approach to interest rate cuts. This has been denting consumer sentiment this year, with major indexes that started retreating in late December, extending their losses into the new year.
Given this uncertain environment, utility funds like Fidelity Select Utilities (FSUTX - Free Report) , American Century Utilities Inv (BULIX - Free Report) and Franklin Utilities Fund (FKUTX - Free Report) are safe bets.
Consumer Sentiment Declines in January
The University of Michigan’s Consumer Sentiment Index showed a preliminary reading of 73.2 in January, down from December’s 74 and below the consensus estimate of 73.8. Additionally, one-year inflation expectations rose from 2.8% in December to 3.3% in January, while long-term expectations climbed to 3.3% from 3% the previous month.
The dip in sentiment reflects growing consumer concern about the economy’s outlook as inflation has steadily increased over the last two months. Uncertainty about when inflation might stabilize near the Federal Reserve’s 2% goal continues to dampen sentiment.
After a significant decline in the third quarter, inflation began climbing again. The Consumer Price Index (CPI) grew by 0.3% in November, the most significant monthly gain since April 2024, while core CPI, excluding food and energy, rose 0.3% month over month and 3.3% year over year.
The Federal Reserve has reduced interest rates by 100 basis points over its last three meetings. However, higher inflation could prompt the Fed to slow its pace of cuts, with only two rate reductions now anticipated in 2025. Markets currently predict a 97.3% likelihood that the Federal Reserve will keep rates unchanged during its January policy meeting, as indicated by the CME FedWatch tool. Elevated rates may prolong market volatility and weigh further on consumer sentiment.
3 Best Choices
We've identified three utility mutual funds that have demonstrated impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
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 fund seeks capital appreciation. FSUTX normally invests at least 80% of assets in common stocks of companies principally engaged in utilities and companies deriving the majority of their revenues from utility operations.
FSUTX’s 3-year and 5-year annualized returns are 10.2% and 9.6%, respectively. Fidelity Select Utilities fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.67%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
American Century Utilities Inv fund seeks current income and long-term capital growth. BULIX mainly invests 80% of its assets in stocks of companies engaged in the utilities industry. Within this 80% category, the managers will not buy shares of a company unless 50% or more of the company's revenues or net profits come from the ownership or operation of facilities used to provide electricity, natural gas, telecommunications services, cable television, water or sanitary services.
BULIX’s 3-year and 5-year annualized returns are 3.1% and 4.1%, respectively. American Century Utilities Invfund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.66%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Franklin Utilities Fund fund seeks capital appreciation and current income. FKUTX invests at least 80% of its net assets in the securities of public utilities companies. Franklin Utilities Fund invests more than 25% of its total assets in companies operating in the utilities industry. The manager expects more than 50% of the fund's assets to be invested in electric utilities securities.
FKUTX’s 3-year and 5-year annualized returns are 7.3% and 7.4%, respectively. Franklin Utilities Fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.71%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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 >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
3 Utility Funds to Buy as Consumer Sentiment Declines in January
Rising inflation and a robust labor market have sparked worries about the Federal Reserve's future approach to interest rate cuts. This has been denting consumer sentiment this year, with major indexes that started retreating in late December, extending their losses into the new year.
Given this uncertain environment, utility funds like Fidelity Select Utilities (FSUTX - Free Report) , American Century Utilities Inv (BULIX - Free Report) and Franklin Utilities Fund (FKUTX - Free Report) are safe bets.
Consumer Sentiment Declines in January
The University of Michigan’s Consumer Sentiment Index showed a preliminary reading of 73.2 in January, down from December’s 74 and below the consensus estimate of 73.8. Additionally, one-year inflation expectations rose from 2.8% in December to 3.3% in January, while long-term expectations climbed to 3.3% from 3% the previous month.
The dip in sentiment reflects growing consumer concern about the economy’s outlook as inflation has steadily increased over the last two months. Uncertainty about when inflation might stabilize near the Federal Reserve’s 2% goal continues to dampen sentiment.
After a significant decline in the third quarter, inflation began climbing again. The Consumer Price Index (CPI) grew by 0.3% in November, the most significant monthly gain since April 2024, while core CPI, excluding food and energy, rose 0.3% month over month and 3.3% year over year.
The Federal Reserve has reduced interest rates by 100 basis points over its last three meetings. However, higher inflation could prompt the Fed to slow its pace of cuts, with only two rate reductions now anticipated in 2025. Markets currently predict a 97.3% likelihood that the Federal Reserve will keep rates unchanged during its January policy meeting, as indicated by the CME FedWatch tool. Elevated rates may prolong market volatility and weigh further on consumer sentiment.
3 Best Choices
We've identified three utility mutual funds that have demonstrated impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
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 fund seeks capital appreciation. FSUTX normally invests at least 80% of assets in common stocks of companies principally engaged in utilities and companies deriving the majority of their revenues from utility operations.
FSUTX’s 3-year and 5-year annualized returns are 10.2% and 9.6%, respectively. Fidelity Select Utilities fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.67%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
American Century Utilities Inv fund seeks current income and long-term capital growth. BULIX mainly invests 80% of its assets in stocks of companies engaged in the utilities industry. Within this 80% category, the managers will not buy shares of a company unless 50% or more of the company's revenues or net profits come from the ownership or operation of facilities used to provide electricity, natural gas, telecommunications services, cable television, water or sanitary services.
BULIX’s 3-year and 5-year annualized returns are 3.1% and 4.1%, respectively. American Century Utilities Invfund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.66%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Franklin Utilities Fund fund seeks capital appreciation and current income. FKUTX invests at least 80% of its net assets in the securities of public utilities companies. Franklin Utilities Fund invests more than 25% of its total assets in companies operating in the utilities industry. The manager expects more than 50% of the fund's assets to be invested in electric utilities securities.
FKUTX’s 3-year and 5-year annualized returns are 7.3% and 7.4%, respectively. Franklin Utilities Fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.71%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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 >>