Trump Completes First Year in Office: 5 Winning Funds

All the major bourses moved north and scaled record highs following Donald Trump’s completion of first year in office as the President. During this phase, Trump made a series of diplomatic decisions and several announcements keeping with his protectionist agenda. Specially, his pro-business policies improved investors’ sentiment and gave a boost to sectors like healthcare and technology. Thus, investing in mutual funds having significant exposure to these sectors seems judicious.

Major Indexes Post Strong Rally

The Dow soared 32.1% during the first year of Trump’s Presidency (Jan 20, 2017 to Jan 19, 2018), with Jan 20 of this year being a Saturday. This turned out to be the second-best performance of the blue-chip index in the first year of office of a U.S. President. Here, are the top five performances of the Dow in the first year of office of a U.S. head.

Name of the President	Political Party	Dow’s First-Year Performance
Franklin D. Roosevelt	Democrat	96.1%
Donald J. Trump	Republican	32.1%
Franklin D. Roosevelt (was succeeded by Harry S. Truman before completing one-year)	Democrat	30.1%
Barack Obama	Democrat	28%
Theodore Roosevelt	Republican	23.6%

Source: WSJ Market Data Group

During the same period, the tech-heavy index Nasdaq surged 32.4%, while the broader S&P 500 rose more than 20%.

Sectors Gained Significantly in Trump’s First Year

From the passage of the tax cut bill to easing of regulations on both small and large businesses, a slew of Trump administration’s policy changes boosted investor sentiment. In this context, we have focused on two key sectors, healthcare and technology, which are expected to get more investor attention this year.

2017’s “Repeal and Replace” Scare

One of Trump’s key agenda was to repeal and replace the Affordable Care Act. However, the bill faced a serious legislative reversal, following which Trump issued an executive order and took several steps, all of which sought to weaken, if not replace, Obamacare entirely.

Nevertheless, the Trump administration sought to achieve its primary objectives, tax cuts and a new healthcare legislation, through the Tax Cuts and Jobs Act of 2017. The new legislation effectively repeals the individual mandate, which is essential for the proper functioning of Obamacare. (Read More: 4 Great Healthcare Stocks to Buy Ahead of Q4 Earnings)

The healthcare sector is expected to gain following the repeal of the individual mandate. Thus, mutual funds from this sector are expected to witness strong gains this year. According to Morningstar, the healthcare mutual fund posted a return of 11.2% in the last three-month period.

Factors Contributing to Tech Gains

The Tax Cuts and Jobs Act of 2017, which was passed last December lowers the corporate tax rate to 21% from 35%. Lower corporate tax will encourage tech companies to raise investment in new cloud services and data centers.

Further, Trump’s tax repatriation policy, which contains a one-time tax of 8% on illiquid overseas assets, is likely to improve the overall financial health of tech companies. The law also sets a 15.5% one-time tax on cash and cash equivalents held overseas, which in turn will help major tech companies to bring back trillions of dollars held in overseas market. (Read More: 5 Best Technology Mutual Funds to Watch in 2018)

Thanks to these developments, mutual funds from the technology sector are expected to witness healthy gains this year. According to Morningstar, the technology mutual fund posted a return of 10.7% in the last three-month period.

Buy These 5 Top-Performing Mutual Funds

Sectors like healthcare and technology were some of the strong gainers during the first year of Trump’s Presidency. In this context, we have chosen five mutual funds that have significant exposure to these two sectors. All these mutual funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). These funds also have impressive three-month and one-year returns. Further, these funds have a low expense ratio and their 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.

T. Rowe Price Health Sciences PRHSX invests a major portion of its net assets in common stocks of companies involved in research, development, production, or distribution of products or services related to health care and life sciences. PRHSX has an annual expense ratio of 0.77%, which is below the category average of 1.35%. The fund has three-month and one-year returns of 11.5% and 36.6%, respectively.The fund has a Zacks Mutual Fund Rank #2.

Schwab Health Care SWHFX invests in equity securities issued by companies in the health care sector. The fund also focuses on investing its assets in securities of biotechnology and pharmaceutical companies. SWHFX has an annual expense ratio of 0.81%, which is below the category average of 1.35%. The fund has three-month and one-year returns of 6.3% and 28%, respectively.The fund has a Zacks Mutual Fund Rank #2.

Fidelity Select Technology Portfolio FSPTX invests a large chunk of its assets in common stocks of companies primarily involved in production, development and sale of products used for technological advancement. FSPTX has an annual expense ratio of 0.76%, which is below the category average of 1.42%. The fund has three-month and one-year returns of 10.7% and 51.7%, respectively.The fund has a Zacks Mutual Fund Rank #1.

Janus Global Technology T JAGTX invests a big portion of its assets in equity securities of those companies that are expected to gain from improvements or advancements in technology. JAGTX has an annual expense ratio of 0.93%, which is below the category average of 1.42%. The fund has three-month and one-year returns of 12.7% and 47.1%, respectively.It has a Zacks Mutual Fund Rank #1.

Columbia Global Technology Growth Fund A CTCAX invests a bulk of its assets in common stocks, preferred stocks and securities that are convertible into common or preferred stocks. These equity securities are issued by technology companies. CTCAX has an annual expense ratio of 1.32%, which is below the category average of 1.42%. The fund has three-month and one-year returns of 11.2% and 46.2%, respectivelyand a Zacks Mutual Fund Rank #1.

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