The Santa Claus rally appears to be fading as 2025 draws to a close. All major market indexes finished lower on the first two trading days of the final week of the year, pressured by a sharp selloff in technology stocks and a series of discouraging economic reports.
New data showed that consumer confidence weakened further in December, as consumers grew anxious over job security and household income as the broader economy continues to slow. Given this situation, investors may consider investing in large-cap value funds, such as Northern Income Equity NOIEX, BNY Mellon Dynamic Value Fund DAGVX and Vanguard Equity Income Fund VEIPX.
Consumer Confidence Dips
Consumer confidence has continued to slide over the past several months. The Conference Board reported that its Consumer Confidence Index dropped 3.8 points to 89.1 in December from November’s 92.9 reading.
The Present Situation Index, which measures how consumers view current business and labor market conditions, fell sharply by 9.5 points to 116.8.
Meanwhile, the Expectations Index — a gauge of consumers’ outlook for income, business activity, and employment — held steady at 70.7. However, it has remained below the critical 80 level for 11 consecutive months, a signal that often points to an increased risk of recession. The ongoing decline reflects concerns about a softening labor market and slowing income growth.
The Federal Reserve cut interest rates three times this year, each by 25 basis points, but has signaled a more cautious approach going forward, projecting just one rate cut next year as inflation pressures persist. At the same time, the tech-led rally that had powered markets higher has begun to lose momentum, with investors pulling back from richly valued AI-related stocks amid questions about long-term profitability.
3 Best Choices
We've identified three large-cap value mutual funds that have given impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
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).
Northern Income Equity fund seeks to provide a high level of current income with long-term capital appreciation as a secondary objective. NOIEX’s approach is to identify the securities of companies that generate high current yields and offer prospects for growth and possible capital appreciation.
NOIEX’s 3-year and 5-year annualized returns are 18.4% and 15.1%, respectively. Northern Income Equity fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.49%, which is lower than its category average.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
BNY Mellon Dynamic Value Fund seeks capital appreciation. DAGVX invests at least 80% of its assets in stocks. BNY Mellon Dynamic Value Fund invests in companies of any size, and uses a value approach in selecting stocks for investment.
DAGVX’s 3-year and 5-year annualized returns are 13.6% and 16.8%, respectively. BNY Mellon Dynamic Value Fund has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.93%, which is lower than the category average.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Vanguard Equity Income Fund seeks a high level of dividend income and long-term growth of income and capital. VEIPX invests in a diversified group of large and mid-capitalization stocks with above-average dividend yields and reasonable prospects for long-term price appreciation.
VEIPX’s 3-year and 5-year annualized returns are 11.8% and 13.4%, respectively. Vanguard Equity Income Fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.26%, which is lower than its category average.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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This article originally published on Zacks Investment Research (zacks.com).
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