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U.S. equity markets fared decently in April, registering moderate gains. In fact, stocks have gained throughout the month in their best start to a year in decades. This market momentum could continue on the back of a dovish Fed, lower inflation and strong Q1 GDP.
Benchmark Indexes’ Performance in April
The broader S&P 500, Dow Jones and tech-laden Nasdaq gained 2%, 0.5% and 2.4%, respectively, in April. The gains are indicative of the sustainability of the longest-in-history bull market, which officially marked a decade in March. Chances are that this bull market could last longer.
Fed’s Patient Approach to Rates
The Fed, after concluding its recent two-day meeting, decided to keep its benchmark interest rates unchanged in the range of 2.25-2.5%. Although Federal Reserve Chairman Jerome Powell acknowledged sluggish business and household spending, which usually are indicators of the overall economic health of the country, he said that core and overall inflation levels are below Fed’s target.
Since the beginning of this year, Fed had made it clear that it is in no hurry to raise rates. Global slowdown coupled with trade worries and satisfactory conditions of the U.S. economy were the reasons behind Fed’s patient approach.
A low-interest rate environment is good for equities because it gives companies ample scope to purchase and expand their business. Given that business spending has been low these past few months, Fed’s decision could be a booster for companies in the days to come.
Strong First-Quarter GDP
The U.S. economy registered the best first-quarter gains since 2015 in Q1 2019, up 3.2% on an annualized basis. The impressive figure beat analyst expectations of 2.3% rise in GDP. The economy has taken a leap from Q4 2018 GDP as well, which had expanded at a pace of 2.2%.
The growth is especially deemed impressive because the U.S. economy fared well despite a 35-day federal shutdown, trade deal tensions and uncertainty over tax refunds. This is indicative of the underlying strength of the economy and gains ahead.
Surprise Jump in Equity Markets Likely
According to a CNBC report, Morgan Stanley and Bank of America indicated a sudden jump in financial markets ahead, mostly due to investors who are late starters but are willing to make the most of the so-called late-stage bull market.
Our Choices
Given the encouraging factors propelling U.S. equity markets, here are four equity mutual funds you could consider investing in. We have selected funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5,000.
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 Semiconductors Portfolio (FSELX - Free Report) fund aims for capital appreciation. The fund invests the majority of its assets in securities of companies that are engaged in design, manufacture, or marketing of semiconductors and semiconductor equipment. The non-diversified fund mostly invests in common stocks.
This Zacks sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSELX has an annual expense ratio of 0.73%, which is below the category average of 1.31%. The fund has three and five-year returns of 24.2% and 19.5%, respectively. The minimum initial investment for the fund is $2500. The fund has returned 6.2% over the past one month.
Touchstone Mid Cap Growth Fund Class Y (TEGYX - Free Report) seeks to increase the value of fund shares first, and secondly aims to earn income. The fund invests the majority of its assets in equity securities of mid-cap U.S companies. A mid-cap company is one that has market capitalization between $1.5 billion-$12 billion or falls within the range of market capitalizations represented in the Russell Midcap Index at the time of purchase.
This Zacks sector – Mid Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TEGYX has an annual expense ratio of 1.03%, which is below the category average of 1.19%. The fund has three and five-year returns of 15.7% and 11.1%, respectively. The minimum initial investment for the fund is $2500. The fund has returned 2% over the past one month.
Morgan Stanley Institutional Fund Trust Discovery Portfolio Class A (MACGX - Free Report) aims for long-term capital appreciation. The fund's adviser aims for long-term capital growth by mostly investing in established and emerging companies that have capitalizations in the range of companies included on the Russell Midcap Growth Index.
This Zacks sector – Mid Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
MACGX has an annual expense ratio of 1.02%, which is below the category average of 1.19%. The fund has three and five-year returns of 23.3% and 10%, respectively. The minimum initial investment for the fund is $1000. It has returned 2.8% over the past one month.
DWS Capital Growth Fund - Class S (SCGSX - Free Report) aims to provide long-term capital growth. The fund invests the majority of its net assets in common stocks of American companies. It usually focuses on companies that are established or are similar in size to those included in the S&P 500 Index or the Russell 1000 Growth Index.
This Zacks sector – Large Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
SCGSX has an annual expense ratio of 0.70%, which is below the category average of 1.06%. The fund has three and five-year returns of 16.1% and 13.2%, respectively. The minimum initial investment for the fund is $2500. The fund has returned 2% over the past one month.
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4 Top-Ranked Equity Funds to Buy in May
U.S. equity markets fared decently in April, registering moderate gains. In fact, stocks have gained throughout the month in their best start to a year in decades. This market momentum could continue on the back of a dovish Fed, lower inflation and strong Q1 GDP.
Benchmark Indexes’ Performance in April
The broader S&P 500, Dow Jones and tech-laden Nasdaq gained 2%, 0.5% and 2.4%, respectively, in April. The gains are indicative of the sustainability of the longest-in-history bull market, which officially marked a decade in March. Chances are that this bull market could last longer.
Fed’s Patient Approach to Rates
The Fed, after concluding its recent two-day meeting, decided to keep its benchmark interest rates unchanged in the range of 2.25-2.5%. Although Federal Reserve Chairman Jerome Powell acknowledged sluggish business and household spending, which usually are indicators of the overall economic health of the country, he said that core and overall inflation levels are below Fed’s target.
Since the beginning of this year, Fed had made it clear that it is in no hurry to raise rates. Global slowdown coupled with trade worries and satisfactory conditions of the U.S. economy were the reasons behind Fed’s patient approach.
A low-interest rate environment is good for equities because it gives companies ample scope to purchase and expand their business. Given that business spending has been low these past few months, Fed’s decision could be a booster for companies in the days to come.
Strong First-Quarter GDP
The U.S. economy registered the best first-quarter gains since 2015 in Q1 2019, up 3.2% on an annualized basis. The impressive figure beat analyst expectations of 2.3% rise in GDP. The economy has taken a leap from Q4 2018 GDP as well, which had expanded at a pace of 2.2%.
The growth is especially deemed impressive because the U.S. economy fared well despite a 35-day federal shutdown, trade deal tensions and uncertainty over tax refunds. This is indicative of the underlying strength of the economy and gains ahead.
Surprise Jump in Equity Markets Likely
According to a CNBC report, Morgan Stanley and Bank of America indicated a sudden jump in financial markets ahead, mostly due to investors who are late starters but are willing to make the most of the so-called late-stage bull market.
Our Choices
Given the encouraging factors propelling U.S. equity markets, here are four equity mutual funds you could consider investing in. We have selected funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5,000.
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 Semiconductors Portfolio (FSELX - Free Report) fund aims for capital appreciation. The fund invests the majority of its assets in securities of companies that are engaged in design, manufacture, or marketing of semiconductors and semiconductor equipment. The non-diversified fund mostly invests in common stocks.
This Zacks sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSELX has an annual expense ratio of 0.73%, which is below the category average of 1.31%. The fund has three and five-year returns of 24.2% and 19.5%, respectively. The minimum initial investment for the fund is $2500. The fund has returned 6.2% over the past one month.
Touchstone Mid Cap Growth Fund Class Y (TEGYX - Free Report) seeks to increase the value of fund shares first, and secondly aims to earn income. The fund invests the majority of its assets in equity securities of mid-cap U.S companies. A mid-cap company is one that has market capitalization between $1.5 billion-$12 billion or falls within the range of market capitalizations represented in the Russell Midcap Index at the time of purchase.
This Zacks sector – Mid Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TEGYX has an annual expense ratio of 1.03%, which is below the category average of 1.19%. The fund has three and five-year returns of 15.7% and 11.1%, respectively. The minimum initial investment for the fund is $2500. The fund has returned 2% over the past one month.
Morgan Stanley Institutional Fund Trust Discovery Portfolio Class A (MACGX - Free Report) aims for long-term capital appreciation. The fund's adviser aims for long-term capital growth by mostly investing in established and emerging companies that have capitalizations in the range of companies included on the Russell Midcap Growth Index.
This Zacks sector – Mid Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
MACGX has an annual expense ratio of 1.02%, which is below the category average of 1.19%. The fund has three and five-year returns of 23.3% and 10%, respectively. The minimum initial investment for the fund is $1000. It has returned 2.8% over the past one month.
DWS Capital Growth Fund - Class S (SCGSX - Free Report) aims to provide long-term capital growth. The fund invests the majority of its net assets in common stocks of American companies. It usually focuses on companies that are established or are similar in size to those included in the S&P 500 Index or the Russell 1000 Growth Index.
This Zacks sector – Large Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
SCGSX has an annual expense ratio of 0.70%, which is below the category average of 1.06%. The fund has three and five-year returns of 16.1% and 13.2%, respectively. The minimum initial investment for the fund is $2500. The fund has returned 2% over the past one month.
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 >>