Sector Rotation: Energy Services is the Best-Performing Sector

The comparison of the three-month returns of the 40 Fidelity Select sector funds shows a wide performance gap between the best and the worst sectors:

Investments in natural resources gained the most. The combination of the rollout of COVID19 vaccinations, expectations for additional fiscal stimulus, and a rebounding economy can continue to fuel the gains, in our view. In this group, the Fidelity Select Energy Services Fund (FSESX) is the top performer (Chart 1).

Chart 1.

Higher interest rates and the steepening of the yield curve benefitted stocks in financial services. The Fidelity Select Banking Fund (FSRBX) shows the best gain in this group (Chart 2).

Chart 2.

The rebound of economic activity, higher savings rates, and anticipated easing of the pandemic related restrictions can further increase consumer spending. Travel and other leisure investments are especially poised for a rebound. We think that the Fidelity Select Consumer Discretionary Fund (FSCPX) is positioned well for a strong performance in 2021 (chart 4).

Chart 3.

The weakest sector fund in our survey is the Fidelity Select Gold Fund (FSAGX), as the relative performance of gold stocks vs. the S&P 500 index (shown in the bottom panel of Chart 4) continues to trend lower.

Chart 4.

Click here to view the rankings of all Fidelity sector funds. The performance comparisons are updated daily utilizing the momentum screen at FidelitySectorReport.com.

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The Stock Market is Climbing the Proverbial Wall of Worry

The S&P 500 index continues to climb in September, in spite of worries about multiple potential trade wars:

 

As we highlighted in June (read article), the strong economy and increased consumer spending favor the consumer cyclical sector. That is why one of our favorite sector investments is the Fidelity Select Consumer Discretionary Fund (FSCPX):

 

View fund rankings at FidelitySectorReport.com

 

 

 

 

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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:

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.

 

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.

 

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.

 

View fund rankings at FidelitySectorReport.com

 

 

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