Consumer sentiment hit a new low in April as worries over recession continue to mount following President Donald Trump’s decision to impose extensive tariffs on all countries doing business with the United States.
While inflation saw a slight dip in March, it's unlikely that the Federal Reserve will go for interest rate cuts anytime soon. The central bank is expected to take a wait-and-see approach before making any monetary policy moves.
In light of the current uncertainty, it would be wise to consider investing in defensive, low-risk funds such as healthcare. Three such funds are Fidelity Select Health Care FSPHX, Janus Henderson Global Life Sciences D JNGLX and Vanguard Health Care Fund VGHCX.
Consumer Sentiment Plummets
According to a University of Michigan survey, consumer sentiment fell to 52.2 in April. Although it was slightly better than the initial April reading of 50.8, consumer sentiment is still sharply below the final reading of 57 in March.
Year over year, consumer sentiment fell 34.2%, marking the lowest level since June 2022 and the second-lowest since 1952.
Consumers’ long-term inflation expectations came in at 6.5%, slightly lower than the initial reading of 6.7% but sharply higher than the previous month’s reading of 5% and the highest level since 1981.
Long-term inflation expectations jumped to 4.4%, the highest level since June 1991 and up from March’s reading of 4.1%.
Markets Shaken by Tariff Threats
Trump’s tariff measures have wreaked havoc in financial markets. He announced a baseline 10% tariff on all trade partners and an aggressive 145% tariff on Chinese goods. As a result, Wall Street saw $6.2 trillion in market value being erased in just two trading sessions.
Although Trump later announced a 90-day suspension of tariffs for all countries except China, which sparked a major market rebound, uncertainty remains. The pause is temporary, and investors are unsure of the administration’s long-term trade strategy. Trade negotiations have started with some countries but not with China.
Although Trump has assured that tariffs on Chinese imports will ease significantly, investors still don’t have much clarity. Meanwhile, inflation, despite unexpectedly declining in March, continues to be a major concern. The consumer price index (CPI) fell 0.1% in March after a 0.2% increase in February, marking the first monthly decline since May 2020.
The Fed has paused rate cuts since January, cautious due to persistent inflation risks. Policymakers are unlikely to resume rate reductions until there's clearer evidence that inflation is easing. These ongoing uncertainties are expected to keep financial markets unstable for some time.
3 Healthcare Funds to Buy
We have selected three healthcare funds that are a safe bet during this time of market volatility. Moreover, these funds have encouraging three and five-year returns. 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 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 Health Care fund seeks capital appreciation. FSPHX normally invests 80% of its assets in common stocks of companies principally engaged in the design, manufacture, or sale of products or services used for or in connection with healthcare or medicine.
FSPHX’s 3-year and 5-year annualized returns are 1.1% and 8%, respectively. Fidelity Select Health Care fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.38%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Janus Henderson Global Life Sciences D fund primarily invests in equity securities issued by companies engaged in life sciences orientation.
JNGLX’s 3-year and 5-year annualized returns are 4.9% and 11.1%, respectively. Janus Henderson Global Life Sciences D fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.80%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Vanguard Health Care Fund invests the majority of its net assets in the common stocks of foreign and domestic companies. These companies are engaged in the development, production, or distribution of products and services related to pharmaceutical and medical supply companies, as well as businesses that operate hospitals and other healthcare facilities.
VGHCX’s 3-year and 5-year annualized returns are 2.2% and 8.4%, respectively. Vanguard Health Care Fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.38%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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