Despite a poor show in September with a decline in job additions for the first time in seven years, the sentiment remains positive over U.S. job data. Job additions were low primarily because of workplace disturbances induced by hurricanes Harvey and Irma, which hit several states including Texas and Florida. This is a temporary setback and hiring is expected to recover this month. Job openings are reportedly at record high and the labor market remains tight on the back of a decline in the unemployment rate. Jobless rate settled at its lowest level in the last 16 years.
While the restaurant and leisure industry suffered the maximum number of job loss, following hurricane-induced disruptions, some sectors like health care, financial activities, transportation and warehousing services, and professional and business services witnessed strong job gains. In this context, we have focused on those mutual funds that have significant exposure to these sectors. But before that, let’s take a peek into the data.
Unemployment Rate Sees Record Low
Domestic non-farm payrolls declined by 33,000 in September,the first such job loss since 2010. However, the tumult caused by the hurricanes did not leave an impact on the unemployment rate. According to the U.S. Bureau of Labor Statistics, the unemployment rate declined from 4.4% in August to 4.2% in September, its lowest since February 2001. Moreover, the total number of unemployed persons fell by 331,000 to 6.8 million, its lowest level since December 2000.
Additionally, average hourly earnings rose by 5 cents or 0.5% to $26.55, up 2.9% for the year. This was better than August’s increase of 2.7%. Separately, the September Job Openings and Labor Turnover Survey report highlighted that job openings in the country rose by 54,000 to a seasonally adjusted level of 6.2 million, its highest such level since December 2000.
Sectors that Experienced Job Gains
The restaurant and leisure sector lost around 105,000 jobs and was the biggest contributor to the September job loss. Meanwhile, employment in healthcare increased by 23,000 last month and its average monthly gain in the last one year was 27,000. The broader Health Care Select Sector SPDR (XLV) is up 20% year to date.
Employment in transportation and warehousing service, and professional and business service sectors increased 22,000 and 13,000, respectively. Also, the financial activities sector added 10,000 jobs last month. Further, the Financial Select Sector SPDR (XLF) is up 13.2% so far this year.
Buy These 5 Sectoral Mutual Funds
Here, we have selected mutual funds, which have significant exposure to sectors that saw strong job additions in April. All these funds have a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Further, these funds have encouraging year-to-date (YTD) returns and minimum initial investment within $5000. Also, these funds have low expense ratios.
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.
T. Rowe Price Financial Services (PRISX - Free Report) seeks both capital growth and current income. The majority of its assets are invested in financial services companies. It may also purchase securities of companies involved in providing financial software. The fund uses fundamental bottom-up analysis in order to select securities.
The fund has YTD returns of 14.7% and an expense ratio of 0.88% compared with the category average of 1.40%. PRISX has a Zacks Mutual Fund Rank #1.
Fidelity Select Health Care Services Portfolio (FSHCX - Free Report) invests the majority of its assets in companies that either own or are involved in operating hospital and nursing homes, and are related to the healthcare services sector. FSHCX seeks appreciation of capital. The fund invests in securities of both U.S. and non-U.S. companies.
The fund has YTD returns of 13.9% and an expense ratio of 0.78% compared with the category average of 1.35%. FSHCX has a Zacks Mutual Fund Rank #1.
Fidelity Select Transportation (FSRFX - Free Report) seeks capital growth. FSRFX invests a large part of its assets in securities of companies involved in design, manufacture and sale of transportation equipment as well as providing transportation services. The non-diversified fund invests in both U.S. and non-U.S. companies.
The fund has YTD returns of 13.5% and an expense ratio of 0.82% compared with the category average of 1.21%. FSRFX has a Zacks Mutual Fund Rank #1.
Fidelity Select Financial Services Portfolio (FIDSX - Free Report) invests the majority of its assets in common stocks of companies involved in offering financial services to industry and consumers. FIDSX seeks capital growth for the long run. Before investing in financial companies, the fund measures their industry position and financial condition.
The fund has YTD returns of 13% and an expense ratio of 0.76% compared with the category average of 1.40%. FIDSX has a Zacks Mutual Fund Rank #1.
Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) invests the majority of its assets in companies whose primary operations are related to software or information-based services. FSCSX primarily focuses on acquiring common stocks of both domestic and foreign companies. The fund uses fundamental analysis to select companies for investment purposes.
The fund has YTD returns of 30.2% and an expense ratio of 0.75% compared with the category average of 1.44%. FSCSX has a Zacks Mutual Fund Rank #2.
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