5 Mutual Funds To Buy On 16-Year Low Unemployment Rate

Though the U.S. economy experienced a significant decline in job additions, the unemployment rate slid to a 16-year low in May. Despite the relatively weak May figure, the U.S. job market has remained strong in recent months with most investors expecting the Federal Reserve to hike key interest rates in late June.

Sectors including health care, professional and business services, and food services and drinking places witnessed strong jobs growth. This is why it makes good sense to invest in those mutual funds that have significant exposure to these sectors.

Job Additions Down But Grow at Steady Pace

As per the U.S. Bureau of Labor Statistics, domestic non-farm payrolls increased 138,000 last month, marking a decline from April’s encouraging figure of 211,000. Job growth has experienced a slowdown as the labor market has reached near its full employment level. Despite slowdown in job growth, the U.S. economy has added more jobs in May than the last three months’ average job growth of 121,000.

Unemployment Rate Falls to Record Low

However, the unemployment rate declined from 4.4% in April to 4.3% in May –– the lowest ever in 16 years. The number of unemployed people declined to 6.9 million. Since January, the unemployment rate has experienced a decrease of 0.5% and the number of unemployed fell by 774,000. Additionally, payrolls data also showed that the average hourly wages increased 0.2% to $26.22. Hourly pay rose 2.5% over the last twelve months.

Moreover, the U-6, a broader measure of unemployment including those who work part-time for purely economic reasons, declined to 8.4%, marking its lowest level since mid-2007. The fall in U-6 points during the first three months of the year indicates a strong economy despite weak job growth.

Professional, Business Services Lead Job Gains

Professional and business services led the way with 38,000 job creations in May. An average of 46,000 jobs per month has been added so far this year by the industry, in line with the average monthly job gain last year. Food services and drinking places experienced an increase of 30,000 jobs, leading to 267,000 additions over the last one year.

Additionally, last month, employment in healthcare sector rose by 24,000. The mining sector added 7,000 heads to the payroll and produced around 47,000 jobs since it retreated from its lowest level last October.

Buy These 5 Sectoral Mutual Funds

Strong job additions in business services, healthcare, and food services and drinking places indicate that these sectors are expanding. This is why you would profit from funds investing in these sectors. All these funds have a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Further, these funds have minimum initial investment within $5000. Moreover, these funds have low expense ratios.

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.

Fidelity Advisor Financial Services Fund A FAFDX seeks growth of capital for the long run. FAFDX invests in securities issued by companies that offer financial services to consumers and industries. The fund invests in securities of both U.S. and non-U.S. companies.

The fund has a YTD return of 21.4% and an expense ratio of 1.15% compared with the category average of 1.45%. FAFDX has a Zacks Mutual Fund Rank #2.

Fidelity Select Software & IT Services Portfolio Fund FSCSX heavily invests in securities of companies engaged in research, design, production and distribution of products related to software or information-based services. The fund invests in both domestic as well as foreign issuers.

The fund has a YTD return of 30.5% and an expense ratio of 0.75% compared with the category average of 1.42%. FSCSX has a Zacks Mutual Fund Rank #2.

Fidelity Advisor Health Care Fund A FACDX seeks appreciation of capital. FACDX invests in securities issued by companies engaged in the design, production and sale of products or services used in the health care sector. The fund normally invests in both U.S. as well as non-U.S. companies.

The fund has a YTD return of 9.9% and an expense ratio of 1.04% compared with the category average of 1.28%. FACDX has a Zacks Mutual Fund Rank #2.

Janus Henderson Global Life Sciences Fund T JAGLX invests in securities of companies which have a life science orientation. JAGLX invest a minimum of one-fourth of its assets in securities issued by companies which are categorized in the "life sciences" sector. The fund seeks capital appreciation for the long run.

The fund has a YTD return of 7.7% and an expense ratio of 0.93% compared with the category average of 1.28%. JAGLX has a Zacks Mutual Fund Rank #2.

Fidelity Select Consumer Discretionary Portfolio FSCPX seeks growth of capital. FSCPX invests in securities issued by companies that manufacture and distribute consumer discretionary products and services. The fund normally invests in both domestic and foreign issuers.

The fund has a YTD return of 15.5% and an expense ratio of 0.76% compared with the category average of 1.17%. FSCPX has a Zacks Mutual Fund Rank #2.

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