The unemployment rate declined in April and settled at its lowest level since December 2000, reflecting tighter labor market conditions. Also, the U.S. economy experienced steady jobs growth last month, comparatively better than March’s job additions. A better-than-expected jobs report indicated a rosier economy.
Professional and business services led job gains, followed by healthcare, manufacturing and mining. 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 Falls to Near 18-Year Low
The unemployment rate declined from 4.1% in March to 3.9% in April, the lowest level in nearly 18 years. This pace is also marginally higher than the Federal Reserve’s targeted rate of 3.8%. This is the first time in six months that the unemployment rate has undergone a decline.
Incidentally, jobless rate has fallen below 4% few and far between in the last 70 years. This occurred during the Korean War, Vietnam War and dotcom boom in the late sixties, early seventies and in 2000, respectively. In contrast, unemployment had hit 10% in October 2009 when the U.S. economy was still recovering from the Great Recession.
A section of economists feel that the decline in unemployment rate was partially attributable to a marginal fall in the labor participation rate, which declined from 62.9% to 62.8%. However, most economists expect the unemployment rate to undergo further declines. Currently, the labor market is increasingly tightening and the Fed has projected a jobless rate of 3.6% for 2019. (Read More:Unemployment Falls to Near 18-Year Low: 6 Winning Picks)
Sectors That Led Job Gains
Professional and business services sector added 54,000 jobs in April. The sector has added 518,000 jobs in the last 12 months. Job additions in the manufacturing sector jumped 24,000 last month. In the past 12 months, the sector has created 245,000 jobs, with durable goods’ industries contributing to around three-fourth of the sector’s job additions.
Healthcare employment rose 24,000 last month and around 305,000 in the last one year. Ambulatory health care services contributed more than 17,000 jobs to the sector. Further, employment in the mining sector advanced by 8,000. Jobs in support activities for mining increased by 7,000. Following a sluggish jobs performance in October 2016, the mining sector created 86,000 jobs between that month and the last reporting period.
Buy These 4 Sectoral Mutual Funds
Here, we have selected four mutual funds, which have significant exposure to sectors that saw strong job additions in April. Moreover, these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). 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 should one be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These funds also have encouraging one-year and year-to-date (YTD) returns and minimum initial investment is within $5000. Also, each of these funds has a low expense ratio.
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.
PRISX carries an expense ratio of 0.85% compared with the category average of 1.46%. Moreover, PRISX requires a minimal initial investment of $2,500. The fund has one-year and YTD returns of 18% and 2.7%, respectively.
PRISXhas a Zacks Mutual Fund Rank #2. Further, Gabriel Solomon is the fund manager of PRISX since 2014.
Fidelity Select Health Care Portfolio (FSPHX - Free Report) seeks capital appreciation by and is managed by Fidelity Group. The fund normally invests a bulk of assets in common stocks of companies principally engaged in the design, manufacture, or sale of products or services used for or in connection with health care or medicine.
FSPHX carries an expense ratio of 0.72% compared with the category average of 1.30%. Moreover, FSPHX requires a minimal initial investment of $2,500. The fund has one-year and YTD returns of 15.3% and 7.6%, respectively.
FSPHX has a Zacks Mutual Fund Rank #1. Further, Edward L. Yoon is the fund manager of FSPHX since 2008.
Prudential Jennison Financial Services A (PFSAX - Free Report) invests a heavy portion of its assets in equity securities of asset management companies, securities/brokerage firms, mortgage banking companies, banks, insurance companies, industrial finance companies and leasing companies.
PFSAX carries an expense ratio of 1.37% compared with the category average of 1.46%. Moreover, PFSAX requires a minimal initial investment of $2,500. The fund has one-year and YTD returns of 17.2% and 1.8%, respectively.
PFSAX has a Zacks Mutual Fund Rank #2. Further, Steven A. Gavios is one of the fund managers of PFSAX since 2017.
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.
FSCSX carries an expense ratio of 0.73% compared with the category average of 1.38%. Moreover, FSCSX requires a minimal initial investment of $2,500. The fund has one-year and YTD returns of 26.2% and 6.1%, respectively.
FSCSX has a Zacks Mutual Fund Rank #1. Further, Ali Khan is the fund manager of FSCSX since 2014.
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