Market Rotation: Top 3 Sector Funds for Risk Averse Investors

Summary:

  • A technical screen of all Fidelity sectors mutual funds shows that only three sector funds were able to make new highs after the late July selloff, while consistently outperforming the S&P 500 index throughout 2019
  • In our view, these sector funds can continue to outperform in the last three months of 2019, while offering lower investment risks than other sectors
  • The full sector screen is available at FidelitySectorReport.com

 

The S&P 500 index was not able to reach a new record high in September after the late July selloff:

fxaix.1013.png

 

To identify the best investment opportunities in the current market environment, we performed a momentum screen of all Fidelity select sector funds using the three-month total return. The screen showed that the Construction & Housing (FSHOX), the Wireless (FWRLX) and the Telecom and Utilities (FIUIX) funds are the leading investments right now:

sectors_1013.jpg

 

We found that these sector funds were able to break out to new highs and continue to advance in spite of the recent stock market volatility and fluctuations in interest rates. We think that this trend is due to the continued flow of money into these sectors by risk-averse institutional investors, and will likely continue into early 2020.

fshox.1013.png

fwrlx.1013.png

fiuix.1013.png

 

Cyclical growth sectors can produce attractive returns when the market sentiment turns bullish. In our view, the Fidelity Select Computers (FDCPX) fund stands out in this category by being able to make a new record high after the July selloff:

fdcpx.1013.png

 

 

 

 

 

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