3 Mutual Funds to Buy on Impressive Retail Sales

Nitish Marwah

Per the latest report from the Commerce Department, U.S. retail sales in August increased at a higher-than-expected rate. Though lower than July, the recent reading eased fears of a slowdown in the U.S. economy. The rise was supported by an uptick in sales of new automobiles as well as building supplies.

Moreover, the fact that demand for big-ticket items like cars has remained robust shows that consumers still have faith in the future of the country’s economy. Therefore, investment in mutual funds that can make the most of the promising retail numbers at this juncture may prove to be beneficial.

Demand for New Autos Boosts Retail Sales in August

The U.S. Department of Commerce reported on Sep 13 that retail sales for the month of August increased 0.4%, surpassing the consensus estimate of 0.2%. Sales of autos rose 1.8% to its highest levels in the past five months and provided a big boost to the metric.

On a year-over-year basis, U.S. retail sales increased 4.6% last month. Also, supporting the growth in retail sales was a steady increase in spending on building materials, healthcare and hobbies.

Further, non-store sales, accounting for online sales as well as sales outside bricks-and-mortar stores increased 14.3% on a year-over-year basis. Such sales include orders through call centers, catalogs, door-to-door visits as well as vending machines.

American Consumers Vest their Faith in the Economy

U.S. consumer spending, which accounts for approximately two-thirds of the country’s GDP, increased 4.7% in the second quarter to settle at its highest level in four and a half years. Moreover, an average American’s view of the current economic condition remains the most favorable in the past 19 years. This is mainly due to a robust labor market.

Notably, the Conference Board’s present situation index, which evaluates consumers’ view of the prevalent business and labor market conditions surged to 177.2 in August.

Meanwhile, Fed Chair Jerome Powell had earlier stated that he did not expect a recession in the U.S. economy. At the same time, he emphasized on the fact that the central bank will continue to act appropriately to keep the current phase of economic expansion (now in its 11th year) on track.

3 Mutual Funds to Buy

We have selected three funds that can make the most of this uptick in retail sales. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging one and three-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 Consumer Discretionary FSCPX fund invests a large portion of its assets in securities of companies that manufacture and distribute consumer discretionary goods and services. The fund invests in both domestic and foreign stocks.

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.

FSCPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.78%, which is below the category average of 1.23%. The fund has one and three-year returns of 1.4% and 13.1%, respectively.

Fidelity Select Leisure Fund FDLSX seeks capital appreciation by investing at least 80% of its assets in companies that design, produce or distribute goods or services in the leisure industries. The fund invests in both domestic and foreign stocks.

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.

FDLSX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 1.23%. The fund has one and three-year returns of 17% and 16.6%, respectively.

Fidelity Select Retailing FSRPX fund invests a majority of its assets in securities of companies that merchandise finished goods and services to individual customers. The fund invests in both U.S. and non-U.S. stocks.

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.

FSRPX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76%, which is below the category average of 1.23%. The fund has one and three-year returns of 1.4% and 16.6%, respectively.

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