Back to top

3 Funds to Gain From a Surge in Consumer Confidence

Read MoreHide Full Article

The confidence that an average American vests on the outlook of the U.S. economy, also known as consumer confidence, shot up in May. Much of the surge has been attributed to strong employment prospects, given a tight labor market. Further, retail sales remained robust in April, significantly contributing to gains.

High consumer confidence also strengthens spending in luxury as well as leisure goods, including swank apartments, new appliances and cars. Under such encouraging conditions, it makes buying mutual funds investing in leisure, discretionary and transportation companies prudent.

Consumer Confidence Near 18-Year High

On May 29, the Conference Board reported a surge in consumer confidence among Americans for the month of May. The report indicated a rebound in the level of confidence in the economy that a consumer would vest. The rise followed a decline in April. It also remained near its 18-year high level.

For May, the Conference Board's measure of consumer confidence index is pegged at 128.0 compared with April’s revised reading of 125.6. May’s reading was also slightly better than the consensus estimate of 127.8. The Present Situation index, reflecting current conditions, reached a 17-year high to 161.7 from 157.5 in April. The Expectations index also rose to 105.6 from 104.3 last month.

Strong Retail Sales and Robust Labor Market

Per the latest report from the Commerce Department, U.S. retail sales rose 0.3% for the month of April, on par with the consensus estimate. The metric has steadily increased for two straight months, advancing 4.7% year over year.

The unemployment rate declined from 4.1% in March to 3.9% in April, its lowest level in nearly 18 years. This is the first time in the last six months that the unemployment rate has actually declined. Non-farm payrolls remained healthy in April even as weekly jobless claims staged a steady decline. This indicates heavy recruitment in the days to come.

3 Mutual Funds to Buy Now

Given such positives, we have highlighted three funds having significant exposure on leisure, discretionary and transportation companies. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and one-year returns. Additionally, the minimum initial investment is within $5000.

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.

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 Leisure Fund (FDLSX - Free Report)  seeks capital appreciation. FDLSX normally invests at least 80% of assets in common stocks of companies principally engaged in the design, production or distribution of goods or services in the leisure industries. The fund offers dividends and capital gains twice a year in April and December.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 10.9% and 13.8%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds,  please click here .

FDLSX has a Zacks Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.35%.

Fidelity Select Transportation (FSRFX - Free Report)  seeks capital growth. FSRFX invests the majority of its assets in securities of companies involved in the design, manufacture and sale of transportation equipment and provide transportation services. The non-diversified fund invests in both U.S. and non-U.S. companies.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 9.4% over the three-year and 15.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds,  please click here .

FSRFX has a Zacks Rank #2 and an annual expense ratio of 0.80%, which is below the category average of 1.04%.

Fidelity Select Consumer Discretionary Portfolio Fund (FSCPX - Free Report)  invests in large-blend companies. The objective of FSCPX is to seek capital appreciation. FSCPX normally invests at least 80% of its assets in common stocks of companies principally engaged in the manufacture and distribution of goods and services to both domestic and international consumers.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 11% over the three-year and 13.7% over the five-year benchmarks. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds,  please click here .

FSCPX has a Zacks Rank #2 and an annual expense ratio of 0.77%, which is below the category average of 1.35%.

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 >>




In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Fidelity Select Leisure (FDLSX) - free report >>

Fidelity Select Transportation (FSRFX) - free report >>

FIDELITY SEL CONSUMER DISC (FSCPX) - free report >>

More from Zacks Mutual Fund Commentary

You May Like