Sector Rotation: the Banking and the Telecommunications Sectors are the Top Performers Today; Real Estate and Gold Stocks are in Correction

Markets rallied today due to positive economic data following the sell off yesterday that was triggered by Chairwoman Yellen signaling the possible end of the Federal Reserve’s Quantitative Easing program this year, which may be followed by interest rate increases next year.

The Fidelity Select Banking Fund (FSRBX) was the top performer today. The FSRBX chart shows the continuation of the multi-year bull market.

fsrbx

The Fidelity Select Telecommunications Fund (FSTCX) was the second best performer. The improving economy and innovative new cellphone and service technologies can become catalysts for this sector, which has underperformed the market since last October:

fstcx

The Fidelity Real Estate Fund (FRESX) did not participate in the rally in a meaningful way today. The chart shows that after making impressive gains in 2014, FRESX is in a correction mode now. We continue to like real estate investments, since the improving economy should continue to be positive for both commercial and residential companies in this space.

fresx

While 80% of Fidelity’s Select sector funds gained today, the Fidelity Select Gold Fund (FSAGX) was one of the weakest Fidelity funds. Similarly to real estate, gold stocks had a strong run up in the last few months and now in correction mode. However, unlike real estate, we regard gold and related investment as purely speculative. On the plus side, FSAGX can be used to increase diversification and to hedge against geopolitical events.

fsagx

Source: FidelitySignal.com

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Top 10 Fidelity Sector Funds For The Summer Rally

Fed chairman Bernanke’s comment last week stating that the Fed’s policy will be highly accommodative for the foreseeable future led to an across-the-board rally for the U.S. stock market. The market looks decidedly bullish, with many sectors breaking out to new highs.

On the other hand, we are in the middle of the earnings season, which is often associated with increased volatility. Given the current market environment, what are the best investment choices for Fidelity investors?

To answer this question, first lets look at the data. The table below shows the ranked list of the top 10 Fidelity mutual funds based on three-month return, a measure of price momentum.

Top 10 Fidelity Mutual  Funds

Top 10 Fidelity Mutual Funds

Source: FidelitySignal.com

Surprisingly, all of the Fidelity funds on the top 10 list are sector funds. This is highly unusual. Even a few months ago, we would have seen international funds (e.g. Japanese funds) or other investment choices on this list. Even beaten down sector funds, such as the Fidelity Real Estate Investment Fund (FRESX), are now turning bullish. Consequently, the data tells us that smart money is on U.S. sector investments right now.

The second observation is that the list of top Fidelity funds is highly diversified. In addition, all of the ten funds have returned more than 10% in the last three months, in spite of the recent market correction.

The current leaders are the Fidelity Select Automotive (FSAVX), the Fidelity Select Biotechnology (FBIOX) and the Fidelity Select Banking (FSRBX) funds. In addition, it is important to note that four out of the ten funds are related to the finance sector.

Companies investing in the consumer sector are also bullish. The best fund to play this trend is the Fidelity Select Retailing (FSRPX) fund.

For investors who are looking for emerging trends in technology, the Fidelity Select Software and Computers (FSCSX), the Fidelity Select IT Services (FBSOX) and the Fidelity Select Electronics (FSELX) funds offer new opportunities.

Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

Sector Rotation: Global Equity Markets Stabilize; Fidelity Select Banking Fund is the First Sector Fund to Make a New 52-Week High

Fidelity Select Banking Fund (FSRBX, last change: 1.28%)

The Fidelity Select Banking Fund (FSRBX, last change: 1.28%) shows a bullish chart pattern and is the first Fidelity Select fund to make a new 52-week high following the market correction that started a week ago.

 

Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

Economic Data Lifts Markets; The Fidelity Select Banking Fund is One of the Best Performing Sector Funds Today

Fidelity Select Banking Fund (FSRBX, last change: 1.86%)

As banking stocks stand to benefit from rising interest rates, the renewed interest in this sector is the reason why the Fidelity Select Banking Fund (FSRBX, last change: 1.86%) has gained momentum in the Top 10 Fidelity funds ranking.

Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

Financial stocks cannot break resistance

The Fidelity Select Banking fund (FSRBX, change: -4.58%) lost the most today, as all equity sectors sold off.  FSRBX is also one of the weakest performers of the year with a 13.8% loss.

The Fidelity Select Banking fund (FSRBX, change: -4.58%) lost the most today, as all equity sectors sold off. FSRBX is also one of the weakest performers of the year with a 13.8% loss.

Mutual fund screens and buy/sell signals are provided by FidelitySignal.com