Q3 GDP Remains Robust: 3 Fund Picks

According to the Bureau of Economic Analysis’ first estimate for the third quarter, U.S GDP exhibited growth in the period, albeit moderately lower compared to the prior quarter. However, the GDP growth surpassed consensus estimate for the period.

Also, a dip in business spending was negated by an uptick in consumer spending. Moreover, economists estimate that the economy will continue to expand at 3% in the fourth quarter. With the domestic economy witnessing expansion, growth mutual funds have emerged as prudent investment options.

Consumer Expenditure Grows Stronger

The U.S. GDP increased 3.5% in the third quarter, marginally higher than the estimated level of 3.4%. However, this metric declined slightly from the second quarter’s 4.2% pace, the fastest quarterly increase since the third quarter of 2014.

Notably, the economy’s expansion over the last two quarters has been the fastest since 2014. Meanwhile, consumer spending, which accounts for around two-thirds of GDP, increased at an annual pace of 4% in the third quarter. This marked a significant improvement from the 3.8% pace witnessed in the prior quarter.

Further, this is the sharpest pace of growth in consumer expenditure witnessed in around four years. A robust job market and a steady increase in wages have given a boost to consumer spending in the recent past. Substantial tax cuts implemented by the Trump administration late last year has also been instrumental in boosting economic growth. 

Why Choose Growth Mutual Funds?

With the U.S. economy registering steady growth in recent times, growth funds have become a natural choice for investors, who prefer capital appreciation over the long term to dividend payouts. These funds generally invest in the assets of those companies that carry an above-average growth potential.

Here, we have selected growth funds with small market capitalization and have significant exposure to the domestic market. Small-cap funds generally have a higher risk exposure but are good choices for investors seeking diversification across different sectors. Small-cap companies have lesser international exposure and are most likely to benefit from recent economic expansion.