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Soft Inflation Signals Fed Rate Cut: FSELX, KTCAX, JNGTX to Gain
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The latest data from the Bureau of Labor Statistics reveals that the Consumer Price Index (CPI) for July indicates a slowdown in inflation. The annual inflation rate has decreased to 2.9%, the lowest since March 2021, down from 3% in June. The monthly CPI in July saw a 0.2% increase after a decline of 0.1% in June.
The core CPI, which excludes food and energy prices, also saw an increase of 0.2% in July compared to the 0.1% rise in June. These numbers suggest that inflationary pressures are easing in alignment with the Federal Reserve's goal of reaching its inflation target.
As a result of these developments, market sentiment is leaning toward the possibility of interest rate cuts by the Federal Reserve. Currently, there is a prevailing expectation in the markets with a 63% likelihood of a 25-basis point rate reduction during the Feds meeting scheduled for Sep 17 and 18, according to the CME FedWatch Tool.
In this economic environment, tech mutual funds have emerged as an attractive investment choice. With interest rates reducing borrowing expenses for technology firms, there is potential for increased profitability and enhanced stock valuations. This favorable environment encourages investment in advancements and expansion initiatives as reduced capital costs facilitate funding for research and development projects.
From an investment standpoint, we have selected three tech mutual funds, which are expected to hedge one's 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 Semiconductors Portfolio (FSELX - Free Report) seeks capital appreciation. FSELX invests most of its assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components.
Adam Benjamin has been the lead manager of FSELX since Mar 15, 2020. Most of the fund's holdings were in companies like NVIDIA Corp. (25%), NXP Semiconductors N.V. (6.9%), and ON Semiconductor Corp (6.7%) as of May 31, 2024.
FSELX's 3-year and 5-year returns are 28.3% and 35.3%, respectively. The annual expense ratio is 0.67% compared with the category average of 1.24%. FSELX 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 - Free Report) seeks capital appreciation by investing most of its assets 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 with 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. (9.5%), NVIDIA Corp. (9.2%) and Meta Platforms, Inc. (8.8%) as of Apr 30, 2024.
KTCAX's 3-year and 5-year returns are 9.2% and 19.7%, respectively. The annual expense ratio is 0.87% compared with the category average of 1.02%. KTCAX has a Zacks Mutual Fund Rank #1.
Janus Henderson Global Technology and Innovation Fund (JNGTX - Free Report) aims for long-term growth of capital and specializes in technology. JNGTX invests the majority of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology.
Jonathan Cofsky has been the lead manager of JNGTXsince Feb 28, 2022. Most of the fund's holdings were in companies like Microsoft Corp. (10.7%), NVIDIA Corp (10.4%) and Meta Platforms, Inc. (5.7%) as of Mar 31, 2024.
JNGTX's 3-year and 5-year returns are 6.7% and 18.8%, respectively. The annual expense ratio is 0.78% compared with the category average of 0.99%. JNGTXhas a Zacks Mutual Fund Rank #1.
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Soft Inflation Signals Fed Rate Cut: FSELX, KTCAX, JNGTX to Gain
The latest data from the Bureau of Labor Statistics reveals that the Consumer Price Index (CPI) for July indicates a slowdown in inflation. The annual inflation rate has decreased to 2.9%, the lowest since March 2021, down from 3% in June. The monthly CPI in July saw a 0.2% increase after a decline of 0.1% in June.
The core CPI, which excludes food and energy prices, also saw an increase of 0.2% in July compared to the 0.1% rise in June. These numbers suggest that inflationary pressures are easing in alignment with the Federal Reserve's goal of reaching its inflation target.
As a result of these developments, market sentiment is leaning toward the possibility of interest rate cuts by the Federal Reserve. Currently, there is a prevailing expectation in the markets with a 63% likelihood of a 25-basis point rate reduction during the Feds meeting scheduled for Sep 17 and 18, according to the CME FedWatch Tool.
In this economic environment, tech mutual funds have emerged as an attractive investment choice. With interest rates reducing borrowing expenses for technology firms, there is potential for increased profitability and enhanced stock valuations. This favorable environment encourages investment in advancements and expansion initiatives as reduced capital costs facilitate funding for research and development projects.
From an investment standpoint, we have selected three tech mutual funds, which are expected to hedge one's 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 Semiconductors Portfolio (FSELX - Free Report) seeks capital appreciation. FSELX invests most of its assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components.
Adam Benjamin has been the lead manager of FSELX since Mar 15, 2020. Most of the fund's holdings were in companies like NVIDIA Corp. (25%), NXP Semiconductors N.V. (6.9%), and ON Semiconductor Corp (6.7%) as of May 31, 2024.
FSELX's 3-year and 5-year returns are 28.3% and 35.3%, respectively. The annual expense ratio is 0.67% compared with the category average of 1.24%. FSELX 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 - Free Report) seeks capital appreciation by investing most of its assets 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 with 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. (9.5%), NVIDIA Corp. (9.2%) and Meta Platforms, Inc. (8.8%) as of Apr 30, 2024.
KTCAX's 3-year and 5-year returns are 9.2% and 19.7%, respectively. The annual expense ratio is 0.87% compared with the category average of 1.02%. KTCAX has a Zacks Mutual Fund Rank #1.
Janus Henderson Global Technology and Innovation Fund (JNGTX - Free Report) aims for long-term growth of capital and specializes in technology. JNGTX invests the majority of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology.
Jonathan Cofsky has been the lead manager of JNGTXsince Feb 28, 2022. Most of the fund's holdings were in companies like Microsoft Corp. (10.7%), NVIDIA Corp (10.4%) and Meta Platforms, Inc. (5.7%) as of Mar 31, 2024.
JNGTX's 3-year and 5-year returns are 6.7% and 18.8%, respectively. The annual expense ratio is 0.78% compared with the category average of 0.99%. JNGTXhas a Zacks Mutual Fund Rank #1.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>