3 Funds To Benefit From The Surge In Consumer Confidence

The confidence that an average American vests in the outlook of the U.S. economy, also known as the consumer confidence, shot up to record levels in February. Much of the surge has been attributed to the optimism built around strong employment prospects and a tight labor market even as the economy is growing by leaps and bounds.

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

Consumer Confidence at a 17-Year High

Consumer confidence rose to 17-year high in February to 130.8, surpassing the consensus estimate of 124.5. This is the index’s best reading since November 2000 when it logged a reading of 132.60 — its highest level so far.

The index measures the confidence that an average American has on the current economic scenario and their outlook of the same in the next six months. Such a surge follows a rebound in January from the lows that the index had hit in December.

Robust economic conditions and near full-employment pushed up the confidence to record levels. This further strengthens the purchasing power of a consumer and helps support economic growth. Further, the labor differential, which measures the difference between people who state that jobs are in plenty and those who state that jobs are difficult to find, surged 24.7% to hit its highest levels since 2001. This is evident from the fact that the economy is near full employment. Finally, a number of Americans also reported an increase in monthly income post the enactment of Tax Cuts and Jobs Act.

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 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 are over the three and five-year benchmarks are 13.9% and 16.6%, 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 0.79%, which is below the category average of 1.35%.

Fidelity Select Transportation FSRFX 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 10.8% over the three-year and 18.5% 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 0.82%, which is below the category average of 1.29%.

Fidelity Select Consumer Discretionary Portfolio Fund FSCPX 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 14.9% over the three-year and 16.6% 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 0.76%, which is below the category average of 1.35%.

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