Sector Rotation: Cyclicals are Outperforming Again; Top 3 Consumer Discretionary Funds

Low unemployment and a strong economy are boosting consumer confidence. Not surprising that the market anticipates that consumers will be spending even more on discretionary items, such as entertainment, travel and online shopping.

In our view, the best investment funds to play this trend will continue to be the ones that already perform well. We utilized the sector screen (provided by FidelitySectorReport.com) to identify the best candidates.

Top 3 Fidelity consumer discretionary funds:

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The Fidelity Select Consumer Discretionary Fund (FSCPX) provides a diversified investment in the broad sector. We like FSCPX at this point because it is outperforming the S&P 500 index again and the chart also shows a positive technical setup.

 

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The retailing sub-sector is the strongest within the cyclicals sector. The Fidelity Select Retailing Fund (FSRPX) is already at an all-time record level, but we think that it can go higher. Top holdings of FSRPX include leading companies, such as Amazon, Home Depot, Booking, and Netflix.

 

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In our view, a newly emerging investment opportunity is the Fidelity Select Automotive Fund (FSAVX). After five months of consolidation, we think that the technical picture is improving and FSAVX can catch up to the other sub-sectors in the cyclicals sector.

 

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Sentiment is Turning Bullish Again; Five Sectors that can Lead the Market Higher

Strong earnings and a potential breakthrough in the negotiations with North Korea made investors feel more cheerful and caused a broad rally in the stock market.

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Equity markets around the globe rallied in recent days, but the U.S. market continues to be the leader.

Rising tensions in the Middle-East and the strengthening dollar resulted in the energy and natural resources sectors becoming the strongest performers in the last three months (see article):

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Large-cap real estate stocks also rallied, as we highlighted earlier (see more):

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We also like the bullish trends in technology, medical devices, and financials sectors:

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View fund rankings at FidelitySectorReport.com

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Sector Rotation: How to Play the Breakout in Real Estate

Real estate stocks have been lagging the market due to concerns about rising interest rates. However, with long-term Treasury yields stabilizing in the 2.95 – 3.20% range, we see a new opportunity to look at the real estate sector.

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The chart shows that the Fidelity Real Estate Fund (FRESX) broke out and cleared its 100-day moving average, which we use as an indicator of seasonal trends.

 

International real estate looks even more attractive, as the long-term bullish trend continues to be in place:

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The long-term bullish trend of the Fidelity Real Estate Investment Fund (FIREX) remains intact.

 

View fund rankings at FidelitySectorReport.com

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