Most Profitable Sectors This Year

Welcome to MutualFunds.com

Please help us personalize your experience and select the one that best describes you.

Your personalized experience is almost ready.

Join other Individual Investors receiving FREE personalized market updates and research. Join other Institutional Investors receiving FREE personalized market updates and research. Join other Financial Advisors receiving FREE personalized market updates and research.

Thank you!

Check your email and confirm your subscription to complete your personalized experience.

Thank you for your submission

We hope you enjoy your experience

Channels

Fixed income news, reports, video and more.

Municipal bonds news, reports, video and more.

Practice management news, reports, video and more.

Portfolio management news, reports, video and more.

Retirement news, reports, video and more.

Learn from industry thought leaders and expert market participants.

Find the latest content and information here about the 2019 Charles Schwab Impact Conference.

Advisors

Receive email updates about fund flows, news, upcoming CE accredited webcasts from industry thought leaders and more.

Content focused on helping financial advisors build successful client relationships and grow their business.

Content geared towards helping financial advisors build better client portfolios.

Get insights on the industry trends and investment news from leading fund managers and experts.

Most Profitable Sectors This Year

Grow Green Money
The stock market is a living, breathing organism that changes its nature constantly. Day to day, global events can trigger large, temporary buying or selling activities by investors, making it difficult to predict stock moves. Short-term movements can rattle even the most experienced investors, but those who keep a long-term view know that the market does present a kind of predictable behavior.
The economy typically follows a path known as the business cycle. As the economy ebbs and wanes, different sectors find themselves in and out of popularity. It’s broken down into four separate phases: early, middle, late and recession. Knowing what stage the economy is in can often help you understand what sectors will do well and what sectors will underperform.

Where the Economy Is Today

The stock market is hovering near all-time highs, so it would be natural to assume that we’re currently in the late-stage cycle of economic growth. We’ve hit the top and, based on the lethargic data coming in — such as the Fed’s estimate of just 0.01% GDP growth for the first quarter — a recession phase could be just around the corner. If so, we should see energy and materials leading the way down, while defensive sectors such as utilities and consumer staples start rising as investors begin preparing for the downturn.

And that’s exactly what we see right now. The top three best performing sectors YTD are utilities, energy and materials, which is right in line with what we’d expect to see in the late-stage cycle of economic growth. On top of that, the Fed has started raising interest rates with another hike expected at least once this year — a sign that the Fed believes this market still has room left to run for the foreseeable future.

As the economy hits its peak, investors begin to seek shelter in defensive sectors ahead of the inevitable pullback. Year-to-date, the utilities sector is the best performer, up about 17%. Interested investors might want to take a look at American Century Utilities Fund (BULIX). Up around 15% this year with an expense ratio of just 0.67%, this fund is a bargain in defensive investing.

The energy sector is finally making a comeback this year as oil begins to stabilize. Oil prices have struggled for more than two years now, and the energy trade has been one of the most disappointing. But now this sector is undervalued and making investors significant gains this year. Vanguard Energy Fund (VGENX) is up over 18% year-to-date, and its incredibly low expense ratio of 0.37% makes it very fee-friendly.

The materials sector is a welcome surprise this year considering the difficult environment with commodity values. The uncertainty of equities earlier in the year along with rising volatility gave way to a precious metals bull run with silver and gold leading the way. Even some industrial metals, such as steel and copper, have begun seeing gains this year. Fidelity Select Materials Portfolio Fund (FSDPX) is the best way to get access to this sector. It’s up around 5% year-to-date, comes with a 0.81% expense ratio and carries lower relative risk in its portfolio compared with other materials funds.

As we head into the middle of 2016, it’s likely we’ll see defensive sectors continue to outperform. Utilities and consumer staples should lead all other sectors, and health care should see significant gains as well. Undervalued sectors such as energy will continue to mount a comeback, as oil slowly rises to the upper-$40 to low-$50 range, and materials should pick up the pace after the summer lull.

Final Thoughts

Other defensive sectors, such as health care and consumer staples, should do well going forward and may even take over energy and materials as the highest gaining sector of the year. Financial stocks could see some gains as well if the Fed raises rates again sooner than expected, but they will face headwinds from leveraged loans in the energy space. As usual, the Fed has the reins in this market and will ultimately decide what sectors will outperform this year.

Sign up for Advisor Access

Receive email updates about best performers, news, CE accredited webcasts and more.

Popular Articles

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.


Read Next

Grow Green Money

Most Profitable Sectors This Year

The stock market is a living, breathing organism that changes its nature constantly. Day to day, global events can trigger large, temporary buying or selling activities by investors, making it difficult to predict stock moves. Short-term movements can rattle even the most experienced investors, but those who keep a long-term view know that the market does present a kind of predictable behavior.
The economy typically follows a path known as the business cycle. As the economy ebbs and wanes, different sectors find themselves in and out of popularity. It’s broken down into four separate phases: early, middle, late and recession. Knowing what stage the economy is in can often help you understand what sectors will do well and what sectors will underperform.

Where the Economy Is Today

The stock market is hovering near all-time highs, so it would be natural to assume that we’re currently in the late-stage cycle of economic growth. We’ve hit the top and, based on the lethargic data coming in — such as the Fed’s estimate of just 0.01% GDP growth for the first quarter — a recession phase could be just around the corner. If so, we should see energy and materials leading the way down, while defensive sectors such as utilities and consumer staples start rising as investors begin preparing for the downturn.

And that’s exactly what we see right now. The top three best performing sectors YTD are utilities, energy and materials, which is right in line with what we’d expect to see in the late-stage cycle of economic growth. On top of that, the Fed has started raising interest rates with another hike expected at least once this year — a sign that the Fed believes this market still has room left to run for the foreseeable future.

As the economy hits its peak, investors begin to seek shelter in defensive sectors ahead of the inevitable pullback. Year-to-date, the utilities sector is the best performer, up about 17%. Interested investors might want to take a look at American Century Utilities Fund (BULIX). Up around 15% this year with an expense ratio of just 0.67%, this fund is a bargain in defensive investing.

The energy sector is finally making a comeback this year as oil begins to stabilize. Oil prices have struggled for more than two years now, and the energy trade has been one of the most disappointing. But now this sector is undervalued and making investors significant gains this year. Vanguard Energy Fund (VGENX) is up over 18% year-to-date, and its incredibly low expense ratio of 0.37% makes it very fee-friendly.

The materials sector is a welcome surprise this year considering the difficult environment with commodity values. The uncertainty of equities earlier in the year along with rising volatility gave way to a precious metals bull run with silver and gold leading the way. Even some industrial metals, such as steel and copper, have begun seeing gains this year. Fidelity Select Materials Portfolio Fund (FSDPX) is the best way to get access to this sector. It’s up around 5% year-to-date, comes with a 0.81% expense ratio and carries lower relative risk in its portfolio compared with other materials funds.

As we head into the middle of 2016, it’s likely we’ll see defensive sectors continue to outperform. Utilities and consumer staples should lead all other sectors, and health care should see significant gains as well. Undervalued sectors such as energy will continue to mount a comeback, as oil slowly rises to the upper-$40 to low-$50 range, and materials should pick up the pace after the summer lull.

Final Thoughts

Other defensive sectors, such as health care and consumer staples, should do well going forward and may even take over energy and materials as the highest gaining sector of the year. Financial stocks could see some gains as well if the Fed raises rates again sooner than expected, but they will face headwinds from leveraged loans in the energy space. As usual, the Fed has the reins in this market and will ultimately decide what sectors will outperform this year.

Sign up for Advisor Access

Receive email updates about best performers, news, CE accredited webcasts and more.

Popular Articles

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.


Read Next