The technology sector, led by Apple, semiconductor and large cap Internet companies, has become one of the leading equity sectors in 2015
Rising interest rates resulted in a trend reversal for the utility sector
The strengthening dollar and declining energy prices cause the natural resources sector to resume its decline
The Nasdaq index (where many of the market-leading technology companies are listed) closed above the historically important 5,000 level yesterday. This level has not been seen since the dot com bubble of 2000. This time around, we think that the bull market in the technology sector is sustainable and stock prices will go higher from here.
One of the best ways to participate in this trend for Fidelity mutual fund investors is by building a position in the Select Technology fund (FSPTX). The top portion of the chart below shows that the relative strength of FSPTX compared to the S&P 500 has turned positive in 2015, which is a very bullish sign:
Steadily rising long-term Treasury rates caused a sharp sell off in the interest rate sensitive utilities sector. The chart of the Fidelity Select Utilities Fund (FSUTX) shows that the sector is not participating in the stock market rally and has broken its long-term uptrend:
In a previous article we warned that it is too early to invest in the natural resources sector. In spite of the rally in January, this sector continues to be in a downtrend and we think that there are many better investment opportunities in this market.
The gradually increasing price of natural resources and the prospect of worldwide economic recovery have resulted in the sector becoming one of the top investment areas. Fidelity offers several excellent mutual funds to take advantage of this long-term trend. Here, we highlight three of the top ranked natural resources funds (see ranking).
The Fidelity Select Natural Gas Portfolio Fund (FSNGX) is one of the top performing Fidelity mutual fund in 2014 with a 14.17% year-to-date return. The blue arrow on top panel of the chart shows that FSNGX has outperformed the S&P 500 index since January:
The Fidelity Select Energy Services Fund (FSESX) also shows a similar, very bullish chart pattern:
For investors who are interested in broad diversification across of natural resources, the Fidelity Select Natural Resources Fund (FNARX) offers an excellent investment choice:
Seesaw market action today resulted in the Dow Jones Industrial Average briefly reaching an all-time high level before pulling back at the end of the trading session. Perhaps the most disappointing is the performance of companies in the social media and biotechnology sectors. These sectors led the bull market last year, but they no longer appear to be in in favor with investors.
While market volatility and sector rotation can be confusing on the short run, it is worthwhile to take a look at the long-term picture from time-to-time. The five-year charts below show three excellent Fidelity funds (FNARX, FSNGX and FSENX) that invest in the natural resources sector. This sector includes natural gas, oil and other energy sources, in addition to metals and materials stocks.
The charts show that the natural resources sector resumed its long-term uptrend last July, which coincided with an about 10% increase of crude oil prices. This positive trend is also supported by the American energy renaissance, which includes the development of unconventional and alternative energy resources.
While stocks of natural resources companies can be volatile, this sector continues to be an attractive choice for investors seeking diversification in 2014, because both the fundamental and the technical drivers are in place.
The Fidelity Select Natural Gas Fund (FSNGX, last change: 1.06%) is the best-performing sector fund in October based on the momentum ranking provided by FidelitySignal.com. FSNGX continues to show a bullish chart pattern and a breakout to a new high can provide a new buying opportunity.