All the key indexes touched record highs during the third quarter, with both the Dow and the S&P 500 posting their eighth straight quarter of gains. While the Dow posted its best quarterly winning streak since 1997, the S&P 500 registered its best stretch of quarterly rise since its inception. A significant jump in tech stocks, meanwhile, boosted the tech-laden Nasdaq, which registered its 50th record close of this year on the last trading day of the quarter. The index also posted its fifth straight positive quarter since 2015.
Benchmarks managed to close at record highs despite rising tensions between the United States and North Korea as well as the adverse impact of hurricanes. Solid second-quarter results on steady economic growth helped stocks rally, while optimism over Trump’s tax overhaul made small caps strong investment choices. The small-cap Russell 2000 index also hit record high levels in the said quarter.
Banking on such positive vibes, the addition of mutual funds to your portfolio having strong exposure to U.S. companies could prove lucrative. Now, let us take a look at some of the encouraging factors that contributed to gains in these mutual funds in the third quarter.
Benchmarks Post Record Gains
Moreover, total Q2 earnings for the S&P 500 index were up 11.1% from the same period last year on 5.5% higher revenues. In the third quarter, total quarterly earnings for the S&P 500 index are expected to be up 3.2% from the same period last year on 5% higher revenues. This would follow double-digit earnings growth in each of the preceding two quarters. (Read More: Start of the Q3 Earnings Season)
The resilience of the domestic economy has provided a boost to U.S. corporate profits. The memory of a nominal 1.4% growth in the first quarter is fading, with the economy expanding 3.1% in the second quarter. The upward revision from the 3% growth rate reported last month reflected an uptick in consumer spending levels on strength in the labor market.(Read More: Wall Street Finishes Q3 at Record High: Top 5 Gainers)
Further, the manufacturing index climbed to 60.8% in September from 58.8% in August, scaling the highest since May 2004, per the Institute of Supply Management (ISM).Notably, 17 of the 18 industries reported growth last month, led by textile mills and machinery.
Also,the auto industry reversed a year-long downward trend and posted a solid uptick in car sales in September. According to Autodata Corp, the seasonally adjusted annual sales rate for all U.S. light vehicles touched 18.57 million units last month, up from 16.14 million in the prior month. It also marked the highest sales rate since July 2005.
Small caps, in the meantime, bounced back on renewed hope that key Republican congressional leaders and President Trump’s top associates are working on a tax reform framework.
Buy These 5 Best Performing Mutual Funds
Here, we have selected five mutual funds that have significant exposure to the U.S. stock markets. Moreover, these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). 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 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.
These funds have encouraging third-quarter and year-to-date (YTD) returns and minimum initial investment is within $5000. Also, each of these funds has a low expense ratio.
Fidelity Select Technology (FSPTX - Free Report) seeks growth of capital by investing in common stocks. It normally invests a large portion of its assets in securities of companies principally engaged in offering and developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements.
The fund has third-quarter and YTD returns of 10.3% and 42.5%, respectively, and an expense ratio of 0.76% as compared with the category average of 1.44%.
T Rowe Price Global Technology (PRGTX - Free Report) invests a bulk of its assets throughout the world in common stocks of companies that derive their revenues from the development, advancement, and use of technology. PRGTX invests in a minimum of five countries and a minimum 25% of its assets are invested in foreign companies.
The fund has third-quarter and YTD returns of 8% and 39.9%, respectively, and an expense ratio of 0.90% as compared with the category average of 1.44%.
Vanguard International Growth Investor (VWIGX - Free Report) invests predominantly in stocks of companies located outside the United States and is expected to diversify its assets in countries across developed and emerging markets. The fund focuses mainly on those companies that have above growth potential. VWIGX seeks to offer growth of capital for the long run.
The fund has third-quarter and YTD returns of 10.6% and 38.5%, respectively, and an expense ratio of 0.46% as compared with the category average of 1.18%.
Fidelity OTC (FOCPX - Free Report) seeks capital growth on a long-term basis. The majority of its assets are invested in securities that are traded mainly on the Nasdaq or an OTC market, which have more mid- and small-cap companies than other markets. A maximum of 25% of its assets may be utilized to conduct short sales. It invests either in value or growth stocks or in both.
The fund has third-quarter and YTD returns of 1.2% and 31.3%, respectively, and an expense ratio of 0.81% as compared with the category average of 1.14%.
Goldman Sachs High Yield Municipal Fund A(GHYAX - Free Report) invests the bulk of its assets in fixed income securities, whose interest is exempted from regular federal income tax. The fixed income securities are issued on behalf of territories and states of the United States. GHYAX seeks growth of income, which is free from regular federal income tax.
The fund has third-quarter and YTD returns of 1.1% and 7.6%, respectively, and an expense ratio of 0.85% as compared with the category average of 0.92%.
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