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4 Mutual Funds to Buy on Strong Consumer Confidence

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Consumer confidence rose to a record high in May propelled by a strong labor market. Consumers remained highly optimistic about growth in the coming months despite ongoing trade tensions between the United States and China. This optimism is likely to boost consumer spending in the near future. Therefore, purchasing mutual funds that invest in transportation, leisure and utility companies makes sense.

Consumer Confidence at Six-Month High

According to the Conference Board, the Consumer Confidence Index surged in May to 134.1 from April’s 129.2. May’s figure not only beat estimated levels of 129.5, but also hit the highest reading in six months.

Apart from this, the Present Situation index, which is indicative of current business and labor market conditions, rose to 175.2 in May from 169.0 in April. The Expectations Index moved up as well, hitting 106.6 this month from April’s 102.7. This index points toward consumers' short-term outlook for income, business and labor market conditions.

Strong Labor Market Boosts Consumer Confidence

Nonfarm payrolls rose 263,000 in April, which exceeded the consensus estimate of 189,000, per the latest US Department of Labor data. This significant rise in new jobs ensured that unemployment hit a 50-year low of 3.6% in April from 3.8% in March.

Per a Reuters report, Jennifer Lee, a senior economist at BMO Capital Markets, said, "As long as job growth is strong, that is the green light we need to keep consumers moving along."

In fact, the U6 unemployment rate, which represents those working part-time and those marginally attached to the labor force, was unchanged at 7.3%. This is also indicative of a decline from the year-ago figure of 7.8%.

April’s new jobs created across a wide range of sectors and record low unemployment rate clearly made households more confident in May. Given the strong consumer confidence, consumer spending could record further gains in the coming months. 

4 Best Mutual Funds to Buy

Given the impressive consumer confidence this month, we have selected four mutual funds from utility, transportation and leisure that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (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.

Now we come to the second-most vital question: 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 Telecom and Utilities Fund (FIUIX - Free Report) aims for high total return by combining current income and capital growth. The fund mostly invests in common stocks of companies. It invests the majority of its assets in securities of telecommunications services organizations and utility companies. The non-diversified fund invests in U.S. and non-U.S. issuers alike.

This Zacks sector – Utilities 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.

FIUIXcarries a Mutual Fund Rank #1. The fund has an annual expense ratio of 0.70%, which is below the category average of 1.07%. It has three and five-year returns of 9.9% and 8.2%, respectively, and no minimum initial investment.

Fidelity Select Leisure Portfolio (FDLSX - Free Report) fund aims for capital growth. The fund mostly invests in common stocks of companies. The fund invests the majority of its assets in securities of companies principally engaged in the design, production, or distribution of goods or services in the leisure industries. The non-diversified fund invests in domestic and foreign issuers alike.

This Zacks sector – Other 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.

FDLSXcarries a Mutual Fund Rank #1. The fund has an annual expense ratio of 0.76%, which is below the category average of 1.15%. It has three and five-year returns of 15.7% and 11.9%, respectively, and has a minimum initial investment of $2500.

PGIM Jennison Utility Fund- Class A (PRUAX - Free Report) aims for total return by combining capital appreciation and current income. The fund invests the majority of its investable assets in equity and equity-related and investment-grade debt securities of utility companies. PRUAX is a non-diversified fund.

This Zacks sector – Utilities 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.

PRUAXcarries a Mutual Fund Rank #2. The fund has an annual expense ratio of 0.83%, which is below the category average of 1.07%. It has three and five-year returns of 10.7% and 7.4% respectively, and has a minimum initial investment of $2500.

Fidelity Select Transportation Portfolio (FSRFX - Free Report) fundaims for capital growth. The fund invests the majority of its assets in securities of companies primarily engaged in providing transportation services or companies engaged in designing, manufacturing, distribution or marketing of transportation equipment. The non-diversified fund mostly invests in common stocks of companies and may invest in U.S. and non-U.S. companies.

This Zacks sector – Other 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.

FSRFXcarries a Mutual Fund Rank #2. The fund has an annual expense ratio of 0.79%, which is below the category average of 1.01%. It has three and five-year returns of 15% and 10.4% respectively, and has a minimum initial investment of $2500.

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