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U.S. Consumer Confidence Rebounds in October: 4 Fund Picks

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Americans are regaining confidence in the economy after concerns regarding the spread of the Delta variant of coronavirus eased in October. On Oct 26, the Conference Board reported that its Consumer Confidence Index increased in October to 113.8, surpassing the consensus estimate of 107.5. Consumer confidence had been declining in the past three months after hitting 128.9 in June.

The steep decline in the past months was due to a rise in new coronavirus cases from the rapid spreading Delta variant and rising inflation that became a hurdle for shoppers. However, in October, the healthy labor market and rising wages helped consumers regain confidence in the economy.

The sub-index that measures consumers’ feelings regarding the current economic conditions rose to 147.4 in October from 144.3 last month. Similarly, the sub-index tracking next six months’ expectation also rose to 91.3 from 86.7 in September. Talking about the labor market, consumers remain positive on that front. Notably, 10.6% of consumers said jobs are “hard to get,” down from 13.0% in September, while 55.6% said jobs are “plentiful.”

With consumers optimistic about the economy, 47.6% of the respondents said that they intend to take a vacation within the next six months. The conference board reported that it is the “highest level since the pandemic hit in early 2020.”

Earlier this month, the U.S. Census Bureau had also reported that retail and food services sales rose 0.7% in September, outpacing the consensus estimate of a 0.1% decline. Hence, we can say that the consumers’ assessment of the current conditions and the short-term outlook have increased, raising hopes of faster-than-expected economic recovery. Thus, a rise in consumer confidence will boost spending on luxury, leisure goods, new appliances and cars.

4 Mutual Fund Picks

Given such a rebound in consumer confidence, we have shortlisted four funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to grow. In addition, the minimum initial investment for these funds is within $5,000.

We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify the potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is focused on the fund’s past performance and its likely future success.

The question here is why should investors consider mutual funds? Reduced transaction costs and portfolio diversification without several commission charges associated with stock purchases are primarily the reasons for parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages and How They Make Investors Money).

Fidelity Select Retailing Portfolio FSRPX fund aims for capital appreciation. This non-diversified fund invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.

This Sector - Other product has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned 18.4% and 21.6% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 0.79%.

Fidelity Select Leisure Portfolio FDLSX fund aims at capital appreciation. This non-diversified fund normally invests a majority of assets in the common stocks of companies that are mostly engaged in the design, production or distribution of goods or services in the leisure industries.

This Zacks Sector – Other product has a history of positive total returns for more than 10 years. Specifically, FDLSX has returned 16.6% and 17.1% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDLSX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.77%, below the category average of 0.79%.

Fidelity Select Consumer Discretionary Portfolio FSCPX fund aims for capital appreciation. This non-diversified fund invests the majority of assets in the common stocks of companies engaged in manufacturing and distributing consumer discretionary products and services.

This Zacks Sector – Other product has a history of positive total returns for more than 10 years. Specifically, FSCPX has returned 16.7% and 18% over the past three and five years, respectively. 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 Mutual Fund Rank #2 and an annual expense ratio of 0.76%, which is below the category average of 0.79%.

Fidelity Select Consumer Staples Portfolio FDFAX fund aims for capital growth. It invests a majority of assets in securities of companies primarily engaged in manufacturing, marketing or distribution of consumer staples products. The non-diversified fund invests in both U.S. and non-U.S. issuers.

This Zacks sector – Other product has a history of positive total returns for more than 10 years. Specifically, FDFAX has returned 11.1% and 7.1% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDFAX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.75% versus the category average of 0.76%.

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