Leaders from Congress announced on Feb 7, 2018 that they have agreed upon a two-year budget deal to end the uncertainty surrounding government spending. To this tune, President Trump signed into law the bipartisan budget deal that will keep the government funded for two years on Feb 9. Agreement on the budget legislation came months after both Republicans and Democrats tried to reach a consensus on the deal.
The deal between Senate Republicans and Democrats is poised to beef up spending levels for military as well as domestic programs such as improvement of infrastructure. This agreement indicates that buying mutual funds invested in defense and aerospace companies would be a prudent decision.
Terms of the Deal and Likely Gainers
The bipartisan deal is set to increase federal spending by $300 billion over the two years. This would exceed the ceiling that was imposed by Barack Obama's Budget Control Act of 2011. The spending pact will also raise the defense budget by $165 billion for a couple of years. Military spending will be increased by $80 billion over the remainder of the fiscal year through September and further by $85 billion in fiscal 2019. This comes over and above the emerging war funds of about $140 billion. The defense spending was last raised in 2010.
This surplus of funds will also help the military receive a minimum of $1.4 trillion through September 2019 that is to be utilized in buying fighter jets, ships and other equipment. Further, it is also expected to improve the country's missiles and nuclear bombers.
Moreover, the legislation also beefs up non-defense spending by $63 billion for this year and $68 billion for 2019.
Out of such spending, a major part is expected to be used for infrastructural programs. About $20 billion will be used for infrastructure programs such as surface transportation, rural water, wastewater systems, to name a few, over the two years.
Trump has vouched for an uptick in infrastructure spending since his campaign days. He had promised the citizens of the country to rebuild infrastructure, including roads, bridges, highways and railways. This is why he has pushed the Congress to pass a legislation to stimulate a minimum of $1.5 trillion in new infrastructure outlays. Further, he wants the approval process to be finished within two years.
3 Best Mutual Funds to Buy Now
Given such positives, we have highlighted three mutual funds poised to gain significantly from Trump's bipartisan budget deal that seeks to increase defense and infrastructural spending in the United States. Investing in mutual funds from the space would fetch stupendous returns. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). 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 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.
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 ).
Fidelity Select Industrial Equip Port FSCGX seeks capital appreciation. The fund normally invests the lion's share of its assets in common stocks of companies involved in the manufacture, distribution and service of products and equipment for the industrial sector.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 11.4% and 13%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here .
The Fidelity Select Industrial Equip Port Fund, as of the last filing, allocates its assets in top two major groups; Large Value and Small Growth. The fund invests heavily in defenseand aerospace companies such as Boeing, Lockheed Martin and Raytheon. Such companies are part of the top 10 portfolio holdings of the FSCGX.
This fund has a Zacks Rank #2 and an annual expense ratio of 0.82%, which is below the category average of 1.16%.
Fidelity Select Industrials Fund FCYIX seeks capital appreciation. FCYIX normally invests at least 80% of assets in common stocks of companies principally engaged in the research, development, manufacture, distribution, supply, or sale of materials, equipment, products, or services related to cyclical industries.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 10.8% and 15%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here .
The Fidelity Select Industrials Fund, as of the last filing, allocates its assets in top two major groups; Large Value and Small Growth. The fund invests heavily in defense and aerospace companies such as United Technologies, Northrop Grumman, General Dynamics and Raytheon. Such companies are part of the top 10 portfolio holdings of the FCYIX.
Zacks Rank #1 FCYIX has an annual expense ratio of 0.77%, which is below the category average of 1.27%.
Fidelity Select Construction & Housing Portfolio FSHOX invests a major portion of its assets in securities of companies involved in construction and design of commercial, residential and industrial facilities. The fund seeks growth of capital. FSHOX invests mainly in common stocks of both U.S. and non-U.S. companies.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 12.3% and 14.7%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here .
The Fidelity Select Construction & Housing Portfolio Fund, as of the last filing, allocates its assets in top two major groups; Large Value and Small Value. The fund invests heavily in construction and infrastructure companies such as Home Depot, Lowe's and Vulcan Materials. Such companies are a part of the top 10 portfolio holdings of the FSHOX.
Zacks Rank #2 FSHOX has an annual expense ratio of 0.79%, which is below the category average of 1.20%.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Get Your Free (FCYIX): Fund Analysis Report Get Your Free (FSHOX): Fund Analysis Report To read this article on Zacks.com click here. Zacks Investment Research