Per the latest report from the Institute of Supply Management, the ISM Manufacturing Index surged to reach its highest settlement in the last two years. Such an increase was made possible by an increase in factory activity. Moreover, economists feel that the new tax code would also help manufacturing activity in 2018 as it positively impacts business spending.

Further, sectors that showed maximum gains included transportation, heavy engineering and machinery and fabricated metals among others. Under such conditions, investing in mutual funds from such sectors appears prudent. Let’s look at a few such funds from the Fidelity portfolio that would ride this wave.

Manufacturing Activity in the U.S. is Burgeoning

The ISM manufacturing index rose from 58.2% in November to 59.7% in December. This was also higher than the consensus estimate of 58.2%. The manufacturing index, which contributes around 12% to the U.S. economy, continued to expand in the last month of 2017. The factory activity measure for 2017 average was 57.6%, the highest in 13 years. A reading above 50 depicts that the economy is expanding.

Among the 18 industries that were surveyed, 15 reported growth. Some of these industries include: Machinery; Primary Metals; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Transportation Equipment; and Petroleum & Coal Products among others.

Moreover, the production sub-index increased almost 21 points to 65.8 and the gauge of new orders surged 5.4 points to 69.4 last month. Further, there was a swell in export orders as well.

Manufacturing activity in 2018 would benefit largely from the new tax code introduced last month that slashes the corporate tax rate to 21% from 35%. This is evident from the fact that business spending surged last month just from the optimism built around tax cuts. It goes without saying that business spending might increase further, now that the new tax code has been signed into law.