In June 2023, the Consumer Price Index (CPI) in the United States experienced a slowdown in its annual inflation rate, dropping to 3%, the lowest since March 2021, and below market expectations of 3.1%. This decrease was due in part to a high base effect from the previous year's surge in energy and food prices that had driven the headline inflation rate.

The Producer Price Index (PPI) for final demand increased by a meagre 0.1% last month, following no change in May. Over the 12 months leading up to June, prices for final demand less foods, energy, and trade services experienced total growth of 2.6% per the Bureau of Labor Statistics.

As inflation cools down, it brings forth a range of favorable implications for the tech and consumer discretionary sectors, contributing to an overall promising economic environment. With reduced inflationary pressures, the Federal Reserve is expected to pause interest rate hikes in the long run, which should bode well for the tech sector, resulting in lower borrowing costs for businesses. This decline in borrowing expenses empowers tech companies to undertake essential capital investments in research, development and expansion more efficiently, facilitating innovation and technological advancements.

At the same time, a possible pause in interest rate hikes amid a slowdown in inflation positively impacted consumers by enhancing their purchasing power. As consumer prices stabilize and real income rises, people find themselves with more disposable income. This increase in purchasing power translates into higher demand for consumer discretionary products, such as luxury goods, travel experiences and entertainment services. The consumer discretionary sector thrives as a result, with companies witnessing a surge in revenues and market demand.

By exploring these investment options amid inflationary circumstances highlighted by recent re-ports on PPI and CPI, investors can tap into the technology sector's strengths and benefits from its long-standing track record of success. The can also consider opportunities available within non-essential consumer demands.

Thus, from an investment standpoint, we have selected four mutual funds from the aforesaid areas that are expected to hedge your portfolio against any economic downturn and provide attractive returns.

Mutual funds, in general, reduce transaction costs and diversify the portfolio without commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

These mutual funds, by the way, boast a Zacks Mutual Fund Rank #1 (Strong Buy)or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.

Fidelity Select Technology Portfolio (FSPTX Quick QuoteFSPTX - Free Report) seeks capital appreciation by investing most of its assets in common stocks of companies principally engaged in offering, using, or developing products, processes, or services that will provide or benefit significantly from technological advances and improvements.

Adam Benjamin has been the lead manager of FSPTX since Jan 17, 2022. Most of the fund's holdings were in companies like Apple (19.4%), Microsoft Corp (15.4%) and Nvidia Corp (8.6%) as of Feb 28, 2023.

FSPTX’s 3-year and 5-year returns are 15.5% and 18.3%, respectively. The annual expense ratio is 0.69% compared to the category average of 1.05%. FSPTX has a Zacks Mutual Fund Rank #1.

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

DWS Science and Technology Fund (KTCAX Quick QuoteKTCAX - Free Report) seeks growth of capital by investing in common stocks of U.S. companies in the technology sector. KTCAX advisors use in-depth research to select a diverse portfolio of technology companies that have robust and sustainable earnings growth, large and growing markets, leading products and services, and strong balance sheets.

Sebastian P. Werner has been the lead manager of KTCAX since Nov 30, 2017. Most of the fund's holdings were in companies like Microsoft Corp (8.2%), Nvidia Corp (8%) and Apple Inc (7.7%) as of Apr 30, 2023.

KTCAX's 3-year and 5-year returns are 10.5% and 14.6%, respectively. The annual expense ratio is 0.91% compared to the category average of 1.05%. KTCAX has a Zacks Mutual Fund Rank #1.

Fidelity Select Leisure & Entertainment (FDLSX Quick QuoteFDLSX - Free Report) aims to seek capital appreciation by investing most of its assets in common stocks of companies principally engaged in the design, production, or distribution of goods or services in the leisure industries.

Kevin Francfort has been the lead manager of FDLSX since Sep 7, 2022. Most of the fund's holdings were in companies like Mcdonald's (16.8%), Booking Holdings Inc (11.5%) and Hilton Worldwide Holdings (7.9%) as of Feb 28, 2023.

FDLSX's 3-year and 5-year returns are 20.8% and 12.3%, respectively. The annual expense ratio is 0.74% compared to the category average of 0.79%. FDLSX has a Zacks Mutual Fund Rank #1.

Fidelity Select Retailing Portfolio (FSRPX Quick QuoteFSRPX - Free Report) seeks capital appreciation by investing in common stocks of companies principally engaged in merchandising finished goods and services primarily to individual consumers.

Boris Shepov has been the lead manager of FSRPX since May 15, 2018. Most of the fund's holdings were in companies like Amazon (23.8%), Home Depot Inc (11.6%) and Lowe's Companies Inc(7.6%) as of Feb 28, 2023.

FSRPX's 3-year and 5-year returns are 7.3% and 9.2%, respectively. The annual expense ratio is 0.72% compared to the category average of 0.79%. FSRPX has a Zacks Mutual Fund Rank #2.
 

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