Higher commodity prices have been taking a toll on retail sales. The retail sector has been one of the major casualties of multi-year high inflation levels. However, sales seem to be rebounding as inflation has started seeing signs of slowing. Retail sales grew in April on steady consumer spending.

However, economic uncertainties prevail, and inflation is still a lot higher than the Fed’s target level, which has seen markets remaining volatile. Consumers are thus spending cautiously on necessities and cutting down on luxuries. Given this situation, it would be prudent to invest in consumer staple funds like Fidelity Advisor Consumer Staples Fund Class A (FDAGX Quick QuoteFDAGX - Free Report) , Fidelity Select Consumer Staples Portfolio (FDIGX Quick QuoteFDIGX - Free Report) and Fidelity Select Consumer Staples Portfolio Class C (FDCGX Quick QuoteFDCGX - Free Report) .

Retail Sales jump

The Commerce Department said on May 16 that retail sales rose 0.4% in April after declining 0.7% in March. Economists had forecast a jump of 0.7%. However, the figures are still impressive as the jump is a sign of a rebound.

Core retail sales, which exclude the volatile energy and food prices, rose 0.6% in April. Seven of the 13 categories posted sales growth in April. A low unemployment rate and steady growth in wages are helping consumers spend freely.

Also, despite skyrocketing prices, demand is still high. There were solid job additions in April too, which aided the sector’s revival.

Inflation has been showing signs of easing lately. The Consumer Price Index (CPI) showed that consumer prices rose 4.9% year over year in April compared to a rise of 5% in March. This was the lowest annual rate in two years.

Separately, the Producer Price Index (PPI) showed that wholesale prices grew a meager 0.2% month over month in April, after declining 0.4% in March.

Although prices have been showing signs of cooling lately, inflation is still a lot above the Fed’s target rate of 2%. Hence people are spending cautiously, with purchases primarily being of basic necessities.

The ideal thing to do in this situation would be to invest in defensive sector funds, like consumer staples.

3 Best Choices

We have selected three mutual funds with significant exposure to the retail sector. The funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors in identifying potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Advisor Consumer Staples Fund Class A aims for capital growth. FDAGX invests the majority of its assets in securities of companies that manufacture and market consumer staples products. Fidelity Advisor Consumer Staples Fund Class A primarily invests in common stocks of companies.

Fidelity Advisor Consumer Staples Fund Class A has a history of positive total returns for more than 10 years. Specifically, FDAGX has returned nearly 13.6% and 10.2% over the past three and five-year periods, respectively. FDAGX has a Zacks Mutual Fund Rank #2.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Consumer Staples Portfolio fund aims at capital appreciation. FDIGX invests its assets in the common stock of companies engaged in the manufacture, sale, or distribution of consumer staples.

Fidelity Select Consumer Staples Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FDIGX has returned nearly 13.9% and nearly 10.5% over the past three and five-year periods, respectively. FDIGX has a Zacks Mutual Fund Rank #2.

To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Consumer Staples Portfolio Class C fund invests the majority of its assets in securities of companies whose primary business is the production, sale, or distribution of consumer goods. FDCGX makes investments in both domestic and overseas issuers.

Fidelity Select Consumer Staples Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FDCGX has returned nearly 12.8% and 9.4% over the past three and five-year periods, respectively. FDCGX has a Zacks Mutual Fund Rank #2.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

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