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Inflation has started showing signs of ebbing, which in turn may lead to an uptick in consumer outlays, something that bodes well for the economy. In June, the Consumer Price Index (CPI) rose by 0.2% on a seasonally adjusted basis compared to a 0.1% increase in May. Over the last 12 months, the all-items index increased by 3% before seasonal adjustment.
During the same period, the Producer Price Index (PPI) for final demand showed a slight increase of 0.1%, following no change in May. Over the 12-month period ending in June, prices for final demand, excluding foods, energy, and trade services, advanced by 2.6%.
Furthermore, personal consumption expenditures (PCE) increased 0.2% compared to a 0.1% rise in May. Food prices experienced a slight decrease of 0.1%, while energy product costs rose by 0.6%. Over the 12-month period leading up to June, the PCE price index exhibited a 3% increase. This growth represented the smallest annual gain since March 2021, following a 3.8% rise in May.
After excluding the volatile food and energy components, the PCE price index increased by 0.2% in June, following a 0.3% rise in May. Consequently, the year-on-year increase in the core PCE price index, which excludes food and energy, reached 4.1%. This marked the smallest advance since September 2021 compared to a 4.6% climb recorded in May. These indicators suggest a potential boost in consumer spending, which is encouraging for the overall economy.
The economy, by the way, gathered strength despite a hawkish Federal Reserve. According to the Bureau of Economic Analysis, real gross domestic product (GDP) increased at an annual rate of 2.4% in the second quarter of 2023, following a 2.0% increase in the first quarter. This steady economic growth in the second quarter is due to an increase in consumer spending. Additionally, the University of Michigan's Index of Consumer Sentiment reflects growing optimism among consumers, with the current level reaching 71.60, from 64.40 last month and 51.50 ayear ago.
The labor market is also displaying positive signs. Per the U.S. Bureau of Labor Statistics, compensation costs for civilian workers increased 1.0% from March 2023 to June 2023. Over the year, total compensation rose by 4.5%, wages and salaries rose 4.6%, and benefit costs increased 4.2%.With the chances of a recession falling, the probability of the Federal Reserve implementing rate hikes has also lessened.
Considering this overall economic backdrop of improving growth and easing inflation, investing in growth funds can be a favorable option for investors. Growth funds typically focus on companies that have strong potential for expansion and increased earnings over time.
Thus, from an investment standpoint, we have selected three growth mutual funds, which are expected to hedge one's portfolio against any economic downturn and provide attractive returns. Mutual funds, in general, reduce transaction costs and diversify the portfolio without commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These mutual funds, by the way, boast a Zacks Mutual Fund Rank #1 (Strong Buy)or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
BNY Mellon Large Cap Securities Fund (DREVX - Free Report) seeks to provide long-term capital growth consistent with the preservation of capital by investing in common stocks issued primarily by U.S. companies and in foreign securities.
Karen Miki Behr has been the lead manager of DREVX since Sep 22, 2021. Most of the fund's holdings were in companies like Apple Inc. (8.5%), Microsoft Corp (7.4%) and Alphabet Inc. (5.1%) as of Mar 31, 2023.
DREVX's 3-year and 5-year returns are 15.3% and 14.2%, respectively. The annual expense ratio is 0.71% compared to the category average of 0.99%. DREVX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category and other 1 and 2 Ranked Mutual Funds, please click here.
Principal MidCap Fund (PEMGX - Free Report) seeks long-term growth by investing primarily in common stocks and other equity securities of medium-capitalization companies that its advisors believe offer above-average growth potential.
K. William Nolin has been the lead manager of PEMGX since Dec 6, 2000. Most of the fund's holdings were in companies like TransDigm Group, Inc (5.4%), Copart, Inc. (5.4%) and O'Reilly Automotive, Inc. (4.9%) as of Apr 30, 2023.
PEMGX's 3-year and 5-year returns are 11.2% and 11%, respectively. The annual expense ratio is 0.95% compared to the category average of 1.09%. PEMGX has a Zacks Mutual Fund Rank #1.
Putnam Small Cap Growth Fund (PNSAX - Free Report) seeks capital appreciation by investing primarily in common stocks of U.S. companies, with a focus on growth stocks. PNSAX advisors also invest in small companies of a size similar to those on the Russell 2500 Growth Index.
William J. Monroe has been the lead manager of PNSAX since Dec 6, 2000. Most of the fund's holdings were in companies like TransDigm Group, Inc (5.4%), Copart, Inc. (5.4%) and O'Reilly Automotive, Inc. (4.9%) as of Apr 30, 2023.
PNSAX's 3-year and 5-year returns are 8.9% and 10.6%, respectively. The annual expense ratio is 0.64% compared to the category average of 1.21%. PNSAX has a Zacks Mutual Fund Rank #1.
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3 Growth Mutual Funds to Buy as Inflation Eases
Inflation has started showing signs of ebbing, which in turn may lead to an uptick in consumer outlays, something that bodes well for the economy. In June, the Consumer Price Index (CPI) rose by 0.2% on a seasonally adjusted basis compared to a 0.1% increase in May. Over the last 12 months, the all-items index increased by 3% before seasonal adjustment.
During the same period, the Producer Price Index (PPI) for final demand showed a slight increase of 0.1%, following no change in May. Over the 12-month period ending in June, prices for final demand, excluding foods, energy, and trade services, advanced by 2.6%.
Furthermore, personal consumption expenditures (PCE) increased 0.2% compared to a 0.1% rise in May. Food prices experienced a slight decrease of 0.1%, while energy product costs rose by 0.6%. Over the 12-month period leading up to June, the PCE price index exhibited a 3% increase. This growth represented the smallest annual gain since March 2021, following a 3.8% rise in May.
After excluding the volatile food and energy components, the PCE price index increased by 0.2% in June, following a 0.3% rise in May. Consequently, the year-on-year increase in the core PCE price index, which excludes food and energy, reached 4.1%. This marked the smallest advance since September 2021 compared to a 4.6% climb recorded in May. These indicators suggest a potential boost in consumer spending, which is encouraging for the overall economy.
The economy, by the way, gathered strength despite a hawkish Federal Reserve. According to the Bureau of Economic Analysis, real gross domestic product (GDP) increased at an annual rate of 2.4% in the second quarter of 2023, following a 2.0% increase in the first quarter. This steady economic growth in the second quarter is due to an increase in consumer spending. Additionally, the University of Michigan's Index of Consumer Sentiment reflects growing optimism among consumers, with the current level reaching 71.60, from 64.40 last month and 51.50 ayear ago.
The labor market is also displaying positive signs. Per the U.S. Bureau of Labor Statistics, compensation costs for civilian workers increased 1.0% from March 2023 to June 2023. Over the year, total compensation rose by 4.5%, wages and salaries rose 4.6%, and benefit costs increased 4.2%.With the chances of a recession falling, the probability of the Federal Reserve implementing rate hikes has also lessened.
Considering this overall economic backdrop of improving growth and easing inflation, investing in growth funds can be a favorable option for investors. Growth funds typically focus on companies that have strong potential for expansion and increased earnings over time.
Thus, from an investment standpoint, we have selected three growth mutual funds, which are expected to hedge one's portfolio against any economic downturn and provide attractive returns. Mutual funds, in general, reduce transaction costs and diversify the portfolio without commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These mutual funds, by the way, boast a Zacks Mutual Fund Rank #1 (Strong Buy)or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
BNY Mellon Large Cap Securities Fund (DREVX - Free Report) seeks to provide long-term capital growth consistent with the preservation of capital by investing in common stocks issued primarily by U.S. companies and in foreign securities.
Karen Miki Behr has been the lead manager of DREVX since Sep 22, 2021. Most of the fund's holdings were in companies like Apple Inc. (8.5%), Microsoft Corp (7.4%) and Alphabet Inc. (5.1%) as of Mar 31, 2023.
DREVX's 3-year and 5-year returns are 15.3% and 14.2%, respectively. The annual expense ratio is 0.71% compared to the category average of 0.99%. DREVX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category and other 1 and 2 Ranked Mutual Funds, please click here.
Principal MidCap Fund (PEMGX - Free Report) seeks long-term growth by investing primarily in common stocks and other equity securities of medium-capitalization companies that its advisors believe offer above-average growth potential.
K. William Nolin has been the lead manager of PEMGX since Dec 6, 2000. Most of the fund's holdings were in companies like TransDigm Group, Inc (5.4%), Copart, Inc. (5.4%) and O'Reilly Automotive, Inc. (4.9%) as of Apr 30, 2023.
PEMGX's 3-year and 5-year returns are 11.2% and 11%, respectively. The annual expense ratio is 0.95% compared to the category average of 1.09%. PEMGX has a Zacks Mutual Fund Rank #1.
Putnam Small Cap Growth Fund (PNSAX - Free Report) seeks capital appreciation by investing primarily in common stocks of U.S. companies, with a focus on growth stocks. PNSAX advisors also invest in small companies of a size similar to those on the Russell 2500 Growth Index.
William J. Monroe has been the lead manager of PNSAX since Dec 6, 2000. Most of the fund's holdings were in companies like TransDigm Group, Inc (5.4%), Copart, Inc. (5.4%) and O'Reilly Automotive, Inc. (4.9%) as of Apr 30, 2023.
PNSAX's 3-year and 5-year returns are 8.9% and 10.6%, respectively. The annual expense ratio is 0.64% compared to the category average of 1.21%. PNSAX has a Zacks Mutual Fund Rank #1.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>