4 Funds to Buy on IMF’s Lackluster Global Growth Outlook – October 22, 2019

The International Monetary Fund (IMF) lowered its outlook on global growth yet again, adding that this outlook could diminish significantly if issues related to trade remain unsettled. After all, the U.S.-China trade war and issues related to Brexit have taken a toll on the global economy, and would likely continue to do so if not resolved timely.

In such a scenario, mutual fund investors should look toward safer havens such as the consumer staples, utilities and healthcare sectors.

IMF Slashes its Global Growth Projection

Per its latest World Economic Outlook published earlier in October, the IMF lowered its projections for 2019 GDP growth from 3.2% in July to 3% in October. Global trade uncertainty was cited as the primary hindrance to global economic growth and hence the lower projection.

In fact, the report also sheds light on the fact that the ongoing trade war between the United States and China have led to direct costs, market volatility, lower investment and diminished productivity on the back of disruptions in the supply chain.

Furthermore, geopolitical tensions related to Brexit could potentially lower economic activity and disturb a possible moderate recovery in emerging markets and the eurozone.

Is a Trade Deal Likely in the Near Term?

On Oct 21, President Donald Trump expressed his optimism over a possible U.S.-China trade deal, saying that a deal with the Asian country was “coming along very well.” Trump said China wanted to make a deal because the country’s “supply chain is going down the tubes.”

China’s GDP grew at an annualized rate of 6% in third-quarter 2019, which was its weakest in almost three decades. A worsened scenario for jobs and wages, and reduced business activities contributed toward China’s dull economic growth.

Coming back to the much-anticipated U.S.-China trade deal, Trade Representative Robert Lighthizer said that the first phase of the deal is expected to be finalized by the Asia-Pacific Economic Cooperation meetings in Chile on Nov 16 and 17. However, he also mentioned that there were still outstanding issues that needed to be taken care of.

Why Invest in Defensive Sectors?

Investing in defensive sectors is an ideal way to wait out periods of economic uncertainty. This is because the defensive sectors offer products and services that rarely witness a slowdown in consumer demand during an economic slowdown or financial market turmoil.

Therefore, purchasing mutual funds from the space seems prudent. 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).

Our Choices

We have, therefore, selected four defensive mutual funds. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) and have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.

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

Fidelity Select Consumer Staples Portfolio (FDFAX Free Report) fund invests the majority of its assets in securities of companies that manufacture, market or distribute consumer staples products. FDFAX seeks capital growth. The fund chiefly invests in common stocks.

This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDFAX has an annual expense ratio of 0.77%, which is below the category average of 1.17%. It has returned 25% on a year-to-date basis. FDFAX has no minimum initial investment.

Fidelity Telecom and Utilities Fund (FIUIX Free Report) fund aims for high total return by combining current income and capital growth. FIUIX invests the majority of its assets in securities of utility companies. The fund primarily invests in common stocks. 

This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FIUIX has an annual expense ratio of 0.70%, which is below the category average of 1.11%. It has returned 21% on a year-to-date basis. FIUIX has no minimum initial investment.

Fidelity Select Health Care Portfolio (FSPHX Free Report) fund seeks capital appreciation. The fund invests the majority of its assets in securities of companies that design, manufacture, or market products and services used in the healthcare sector. The fund invests mostly in common stocks of companies.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSPHX has an annual expense ratio of 0.71%, which is below the category average of 1.26%. It has returned 7.6% on a year-to-date basis. FSPHX has no minimum initial investment.

Hartford Healthcare HLS Fund Class IA (HIAHX Free Report) aims for long-term capital growth. The fund invests the majority of its assets in equity securities of companies operating in the healthcare sector. The fund invests in securities of both U.S. and non-U.S. issuers.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

HIAHX has an annual expense ratio of 0.89%, which is below the category average of 1.26%. It has returned 12.2% on a year-to-date basis. HIAHX has no minimum initial investment.

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