Our trades in late April into Fidelity Select Materials (FSDPX) and Fidelity VIP Materials (FVMAC) reflect our short- and longer-term optimism for these economically sensitive funds, notes Jack Bowers, editor of Fidelity Monitor & Insight.

Over the nearer-term, basic raw materials and processed materials like chemicals, plastics, packaging and construction materials, are easier to move through the global supply chain than are more highly manufactured and assembled products ranging from washing ma-chines to cars.

Indeed, a severe shortage of computer chips has ham-strung the production of the latter, sending shares of Ford lower owing to its uncertain output for the rest of this year.

At the same time, with several of the world’s largest economies recovering at a faster-than-expected pace (a listing that includes China, Japan and the U.S.), rising demand is currently pushing prices higher.

The longer-term outlook is also favorable. An increasingly electrified transportation sector and a modernized renewable energy grid re-quires a lot of copper (which Select Materials overweights) and plenty of other raw and manufactured materials.

It’s also worth noting that President Biden’s $2.25 trillion infrastructure plan would only improve the outlook for materials of most every variety.

Granted, Fidelity Select Industrials (FCYIX) and Fidelity VIP Industrials (FAVCC) also stand to benefit from some of these developments. However, we’ve traded out of the funds and downgraded them partly owing to our preference for Materials, and partly because they’ve been lagging their bench-marks.

While stock selection might improve, both funds’ second-largest holding, General Electric (GE), is unlikely to flourish in a world that increasingly turns to solar panels, batteries and electric transportation. (While GE is one of the world’s largest manufacturers of wind turbines, much of its revenue remains reliant on fossil fuels.)

There are two other considerations also worth noting. The first is that based on price-to-earnings, industrials are significantly more expensive than materials.

And while both funds are mid-cap value-leaning offerings, with a relative volatility of 1.26 versus 1.31 for Industrials, Materials is a somewhat lower-risk alternative.

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