The retail industry has continued to expand despite persistent inflationary pressures. Retail sales exceeded expectations again in September, demonstrating the sector’s resilience even as concerns about an economic slowdown persist. While rising gasoline prices contributed to the increase, consumer demand has remained strong.
Consumer spending remained strong, helping retail sales post healthy growth in August. Against this backdrop, retail and discretionary funds are looking increasingly attractive. Investing in funds such as Fidelity Select Retailing Portfolio FSRPX and Fidelity Select Consumer Discretionary Portfolio FSCPX could be a smart move.
Retail Sales Exceed Expectations in September
U.S. retail sales increased 0.8% in September, well above economists’ forecast of 0.3% growth. The latest increase followed a revised 1.3% gain in August, according to data released by the Commerce Department on Thursday.
Retail activity has remained strong this year, with July marking the first monthly decline in sales in five months. Despite the significant contribution from higher gasoline prices in September, the broader sector benefited from sustained consumer demand and steady spending.
Gasoline prices climbed 7.1% during September, while retail sales increased 6.3% from the same month a year earlier. For the July-September period, total sales were up 5.5% compared with the corresponding period last year.
Oil prices have climbed over the past six months amid the Middle East crisis, pushing up the cost of goods. Nevertheless, robust demand has encouraged consumers to maintain relatively strong spending levels despite rising expenses.
According to a Reuters report, market experts expect consumer spending to have increased nearly 3.4% in the third quarter from a year earlier, following a 3.8% rise in the second quarter.
2 Best Choices
We have selected two mutual funds with significant exposure to the retail and discretionary sectors. 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.