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3 Funds to Protect Your Portfolio as Geopolitical Tensions Aggravate
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Geopolitical tensions intensified last week after the United States and Iran resumed exchanging missile strikes, sparking fresh concerns that the conflict could widen. The immediate fallout has been a sharp rise in energy prices as investors feared potential disruptions to global oil supplies.
The latest escalation comes at a time when markets are already grappling with elevated inflation and uncertainty over interest rates. Earlier this year, oil prices surged following the initial U.S.-Iran conflict in late February, driving inflation higher and prompting speculation that the Federal Reserve may have to raise rates before the end of the year.
Investor sentiment has remained fragile, with Wall Street repeatedly rattled by inflation worries, geopolitical risks and a recent sell-off in technology stocks.
Given this situation, investors may consider utility funds like American Century Utilities Inv (BULIX - Free Report) , Franklin Utilities Fund (FKUTX - Free Report) and Fidelity Utilities Fund (FIUIX - Free Report) .
Middle East Tensions Reignite
Hostilities flared again last week as the United States and Iran launched missile strikes against one another. The renewed conflict follows President Donald Trump's statement last week that he was no longer interested in pursuing negotiations with Iran. Since then, Iran has scrapped the temporary memorandum of understanding between the two nations aimed at ending hostilities.
The fresh attacks have already sent oil prices climbing more than 4%, fueled by concerns that the Strait of Hormuz—a crucial route for global oil shipments—could once again face disruptions. Any interruption to traffic through the waterway would threaten energy supplies from the Middle East and put additional upward pressure on crude prices.
Oil markets stabilized in recent weeks after the United States and Iran reached a temporary memorandum of understanding in mid-June. Before that agreement, crude prices had surged nearly 40% following the outbreak of hostilities in late February.
Inflation and Fed Outlook Remain Uncertain
Higher energy costs have contributed to persistent inflationary pressures. The Consumer Price Index declined 0.4% in June after increasing over the past three months. Year over year, inflation eased to 3.5%. However, inflation remains higher than the Fed’s 2% target.
The inflation backdrop has complicated the Federal Reserve's policy decisions. Although the central bank kept interest rates unchanged at 3.5-3.75% during its most recent meeting, the minutes showed policymakers remain divided on whether another rate hike will be necessary. Some officials believe inflation could gradually moderate if geopolitical tensions ease, while others remain concerned that renewed conflict could prolong price pressures.
If inflation continues to stay elevated as energy costs rise again, the Fed could revisit the possibility of tightening monetary policy later this year.
Meanwhile, markets are already navigating heightened volatility driven by a broad technology-sector sell-off, as investors question the durability of the AI-led rally. Combined with geopolitical uncertainty and inflation concerns, these factors are likely to keep market sentiment under pressure in the near term.
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) or 2 (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).
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 its 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 15.7% and 8.5%, respectively. American Century Utilities Invfund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.66%, which is lower than the category average of 0.99%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Franklin Utilities Fund seeks capital appreciation and current income. FKUTX invests at least 80% of its net assets in securities of public utilities. 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 utility securities.
FKUTX’s 3-year and 5-year annualized returns are 16.7% and 11.1%, respectively. Franklin Utilities Fund has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.70%, which is lower than its category average of 0.94%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Utilities fund seeks high total return through a combination of current income and capital appreciation. FIUIX normally invests primarily in common stocks with at least 80% of assets in securities of utility companies.
FIUIX’s 3-year and 5-year annualized returns are 18.7% and 11.8%, respectively. Fidelity Select Utilities fund has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.66%, which is lower than its category average.
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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Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>
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3 Funds to Protect Your Portfolio as Geopolitical Tensions Aggravate
Geopolitical tensions intensified last week after the United States and Iran resumed exchanging missile strikes, sparking fresh concerns that the conflict could widen. The immediate fallout has been a sharp rise in energy prices as investors feared potential disruptions to global oil supplies.
The latest escalation comes at a time when markets are already grappling with elevated inflation and uncertainty over interest rates. Earlier this year, oil prices surged following the initial U.S.-Iran conflict in late February, driving inflation higher and prompting speculation that the Federal Reserve may have to raise rates before the end of the year.
Investor sentiment has remained fragile, with Wall Street repeatedly rattled by inflation worries, geopolitical risks and a recent sell-off in technology stocks.
Given this situation, investors may consider utility funds like American Century Utilities Inv (BULIX - Free Report) , Franklin Utilities Fund (FKUTX - Free Report) and Fidelity Utilities Fund (FIUIX - Free Report) .
Middle East Tensions Reignite
Hostilities flared again last week as the United States and Iran launched missile strikes against one another. The renewed conflict follows President Donald Trump's statement last week that he was no longer interested in pursuing negotiations with Iran. Since then, Iran has scrapped the temporary memorandum of understanding between the two nations aimed at ending hostilities.
The fresh attacks have already sent oil prices climbing more than 4%, fueled by concerns that the Strait of Hormuz—a crucial route for global oil shipments—could once again face disruptions. Any interruption to traffic through the waterway would threaten energy supplies from the Middle East and put additional upward pressure on crude prices.
Oil markets stabilized in recent weeks after the United States and Iran reached a temporary memorandum of understanding in mid-June. Before that agreement, crude prices had surged nearly 40% following the outbreak of hostilities in late February.
Inflation and Fed Outlook Remain Uncertain
Higher energy costs have contributed to persistent inflationary pressures. The Consumer Price Index declined 0.4% in June after increasing over the past three months. Year over year, inflation eased to 3.5%. However, inflation remains higher than the Fed’s 2% target.
The inflation backdrop has complicated the Federal Reserve's policy decisions. Although the central bank kept interest rates unchanged at 3.5-3.75% during its most recent meeting, the minutes showed policymakers remain divided on whether another rate hike will be necessary. Some officials believe inflation could gradually moderate if geopolitical tensions ease, while others remain concerned that renewed conflict could prolong price pressures.
If inflation continues to stay elevated as energy costs rise again, the Fed could revisit the possibility of tightening monetary policy later this year.
Meanwhile, markets are already navigating heightened volatility driven by a broad technology-sector sell-off, as investors question the durability of the AI-led rally. Combined with geopolitical uncertainty and inflation concerns, these factors are likely to keep market sentiment under pressure in the near term.
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) or 2 (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).
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 its 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 15.7% and 8.5%, respectively. American Century Utilities Invfund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.66%, which is lower than the category average of 0.99%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Franklin Utilities Fund seeks capital appreciation and current income. FKUTX invests at least 80% of its net assets in securities of public utilities. 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 utility securities.
FKUTX’s 3-year and 5-year annualized returns are 16.7% and 11.1%, respectively. Franklin Utilities Fund has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.70%, which is lower than its category average of 0.94%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Utilities fund seeks high total return through a combination of current income and capital appreciation. FIUIX normally invests primarily in common stocks with at least 80% of assets in securities of utility companies.
FIUIX’s 3-year and 5-year annualized returns are 18.7% and 11.8%, respectively. Fidelity Select Utilities fund has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.66%, which is lower than its category average.
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 >>