The Wall Street rally faced a hiccup early last week after fresh economic data showed that inflation increased more than expected in January, denting investors’ confidence. Stocks across sectors took a hit as an unexpected jump in inflation dimmed hopes of a rate cut by the Federal Reserve in the coming months.

The consumer price index (CPI) rose 0.3% month over month in January, higher than economists’ expectation of 0.2%. On a year-over-year basis, in January, CPI jumped 3.1% after increasing 3.4% in December.  It was also higher than the consensus estimate of 2.9%.

However, the rally resumed within a couple of days after another set of economic data showed that retail sales slumped sharply in January, while industrial production also unexpectedly declined 0.1% in January.

The Commerce Department reported that retail sales declined 0.8% in January, sharply lower than economists’ expectations of a decline of 0.3%. Although the data initially raised some concerns over U.S. consumers’ spending power amid inflationary pressures, it also once raised hopes that the figures might make the Fed go for a rate cut soon.

The Federal Reserve earlier indicated that it is unlikely that the central bank would be ready for a rate cut in March but it also hinted at multiple rate cuts this year. Investors are now pricing in a 40% chance of a quarter percentage point rate cut in May, according to CME Group’s FedWatch tool.

Stocks went on a rally following that. All three major indexes have so far had a great year, with the S&P 500 and Dow hitting new all-time highs. Rate cuts by the Federal Reserve are expected to further boost investors' sentiment as lower borrowing costs bode well for the broader economy.

3 Best Choices

We have, thus, selected three large-cap mutual funds, namely Fidelity Blue Chip Growth K6 (FBCGX Quick QuoteFBCGX - Free Report) , T. Rowe Price Blue Chip Growth (TRBCX Quick QuoteTRBCX - Free Report) and Janus Henderson Research A (JRAAX Quick QuoteJRAAX - Free Report) , carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain. Moreover, these funds have encouraging three and five-year returns. Additionally, 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 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).

Fidelity Blue Chip Growth K6 fund invests most of its net assets in common stocks of blue-chip companies, according to Fidelity Management & Research Company LLC. FBCGX advisors generally choose to invest in large or medium market-capitalization companies.

Fidelity Blue Chip Growth K6 fund has a track of positive total returns for over 10 years. Specifically, FBCGX’s returns over the three and five-year benchmarks are 6.5% and 19.8%, respectively. The annual expense ratio of 0.46% is lower than the category average of 0.99%. FBCGX has a Zacks Mutual Fund Rank #1.

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’s objective is to provide long-term capital growth. TRBCX invests at least 80% of 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 of positive total returns for over 10 years. Specifically, TRBCX’s returns over the three and five-year benchmarks are 4.3% and 12%, respectively. The annual expense ratio of 0.71% is lower than the category average of 0.99%. TRBCX has a Zacks Mutual Fund Rank #1.

To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.

Janus Henderson Research A fund is a part of the Large Cap Growth mutual fund category. JRAAX invests in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks.

Janus Henderson Research A fund has a track of positive total returns for over 10 years. Specifically, JRAAX’s returns over the three and five-year benchmarks are 8.7% and 15.6%, respectively. The annual expense ratio of 0.62% is lower than the category average of 0.99%. JRAAX has a Zacks Mutual Fund Rank #1.

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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