3 Large-Cap Growth Mutual Funds to Grab as Inflation Cools in June
Inflation cooled sharply in June, bringing major relief to consumers as well as the Federal Reserve. The consumer price index (CPI), the government's primary measure of price changes for goods and services across the economy, posted its steepest monthly decline in more than six years, according to the Commerce Department.
The softer inflation data is expected to ease concerns that the Federal Reserve may need to raise interest rates in the near future. With Wall Street witnessing volatility in recent weeks, the latest CPI report could help restore investor confidence and provide greater market stability.
Against this backdrop, we believe investors should consider large-cap growth funds such as T. Rowe Price Large-cap Growth Fund Class I TRLGX, Fidelity Contrafund FCNTX and T. Rowe Price Blue Chip Growth TRBCX.
Inflation Cools Significantly
The CPI declined 0.4% month over month in June after rising 0.5% in May, surpassing economists' expectations for a 0.2% decline. On an annual basis, headline inflation slowed to 3.5% in June from 4.2% in May, also beating forecasts of a reading of 3.8%. The monthly drop marked the largest since April 2020.
Core CPI, which excludes the more volatile food and energy, was unchanged last month, compared with expectations for a 0.2% increase.
Year over year, core inflation eased to 2.6% from 2.9% in May, while economists had anticipated it would remain at 2.9%.
Energy prices, which had climbed sharply after the U.S.-Iran conflict erupted in late February, retreated significantly in June following a temporary ceasefire between the two countries. As a result, the energy index fell 5.7% during the month, its steepest decline since April 2020.
Several other inflation components also moderated. Services inflation, a closely watched indicator for Federal Reserve policymakers, softened in June, with services excluding energy remaining unchanged. Transportation services prices fell 0.3%, while apparel prices, which are sensitive to both oil costs and tariffs, dropped 0.6%.
The decline in inflation provides the Federal Reserve with greater flexibility. Policymakers were split over the possibility of cutting interest rates at their June meeting, while financial markets continue to expect a 25-basis-point rate cut before the year-end.
With inflation showing signs of cooling, the Fed has additional time to assess incoming economic data before making its next policy move. Lower borrowing costs would support consumer spending and provide a further boost to economic growth.
3 Large-Cap Growth Funds With Upside
We have selected three large-cap growth funds that are poised to gain from the above factors. 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).
T. Rowe Price Large-cap Growth Fund Class I seeks to provide long-term capital appreciation through investments in common stocks of growth companies. TRLGX normally invests at least 80% of its net assets in the common stocks of large companies.
T. Rowe Price Large-cap Growth Fund Class I has a track record of positive total returns for over 10 years. Specifically, TRLGX’s returns over the three and five-year benchmarks are 20.7% and 9.5%, respectively. TRLGX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.55%.
To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.
Fidelity Contrafund seeks capital appreciation. FCNTX invests primarily in the common stock of companies whose value management believes is not fully recognized by the public.
Fidelity Contrafund has a track record of positive total returns for over 10 years. Specifically, FCNTX’s returns over the three and five-year benchmarks are 26.7% and 14.7%, respectively. FCNTX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.75%.
To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.
T. Rowe Price Blue Chip Growth fund seeks long-term capital growth. TRBCX invests at least 80% of its net assets in common stocks of large and medium-sized, blue-chip companies that have the potential for above-average growth in earnings and are well-established in their respective industries.
T. Rowe Price Blue Chip Growth fund has a track record of positive total returns for over 10 years. Specifically, TRBCX’s returns over the three and five-year benchmarks are 21.5% and 9.2%, respectively. TRBCX has a Zacks Mutual Fund Rank #1. And an annual expense ratio of 0.71%.
To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.
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This article originally published on Zacks Investment Research (zacks.com).
