Sector Rotation: Top 3 Financial Sector Mutual Funds

Companies in the financial services industry, such as brokers and banks, have rallied impressively in the last few weeks. In our view, increased dividends and buy backs, and the prospect of deregulation can support a long-term bull market in the financials sector.

To find the best financial sector mutual funds for the current market environment, we utilized the fund ratings provided by our sister site, Fidelity Sector Report.

The top-rated fund is the Fidelity Select Brokerage Fund (FSLBX):

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Another strong performer is the Fidelity Select Consumer Finance Fund (FSVLX). FSVLX primarily invests in credit card companies and mortgage REITs:

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Our third favorite is the Fidelity Financial Services Fund (FIDSX):

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Sector Rotation: Brokerage and Chemical Sectors Show Improving Relative Strength

The list of the top 10 Fidelity funds (ranking provided by FidelitySignal) is currently dominated by mutual funds that invest in the health care and technology sectors, but large cap, retailing, brokerage and chemical funds have also made the list. I’d like to highlight here the Fidelity Select Brokerage (FSLBX) and the Fidelity Select Chemical (FSCHX) funds. Both FSLBX and FSCHX has positive relative strength compared to the S&P 500 index, which shows the potential of these sectors to outperform the market in the seasonally volatile fall period.

FidelitySignal_Research

 

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View investment strategies at FidelitySignal.com

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The Global Equity Sell-off Resumes in February; Treasury Bonds Rise; Utilities are Holding in Bull Market

The stock market sold off today with an accelerated pace in part due to the weak PMI number from China. The benchmark Fidelity Spartan U.S. Equity Index Fund (FUSEX) crossed below its 100-day moving average, which is considered a bearish sign:

fusex

The weakest equity sector was the financials. The Fidelity Select Brokerage Fund (FSLBX) was down the most with a -3.52% loss for the day:

fslbx

The weakest Fidelity international equity fund was the Latin America Fund (FLATX) with a -3.42% loss. Equity markets in Latin America have experienced a tremendous bear market for more than a year now and are severely oversold. We expect a relief rally to happen in the near future.

flatx

Long-term yields continued to decline and investors bid up bonds in a flight to quality. As the result, the Fidelity Spartan Long-Term Treasury Bond Fund (FLBIX) gained 1.12% today:

flbix

One of the few sectors that still remain in a bull market is utility stocks, which are considered defensive investments. The Fidelity Select Utilities Fund (FSUTX) lost -1.27% today, but the chart shows that the bullish uptrend for FSUTX has not been interrupted yet:

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Source: FidelitySignal.com

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