The post-election market rally has lost its stream, with all three major indexes retreating from their record highs. An uptick in inflation and growing concerns over the Federal Reserve slowing its pace of future rate cuts, has turned markets volatile once again.

Given this situation, it would be ideal to invest in value funds like Federated Hermes MDT Large Cap Value Svc (FSTKX Quick QuoteFSTKX - Free Report) , JPMorgan U.S. Applied Data Sci Val I (JPIVX Quick QuoteJPIVX - Free Report) and Dodge & Cox Stock I (DODGX Quick QuoteDODGX - Free Report) .

Inflation Climbs in October

Wall Street went on a rally a day after Donald Trump’s win in the presidential election. The rally gathered further steam after the Federal Reserve announced a 25-basis-point rate cut the next day. This pushed the Dow past the 44,000 mark for the first time early last week, while the S&P 500 and the Nasdaq also hit record highs.

However, the rally has since come to a halt, with markets turning volatile as fresh data released last week showed a rise in inflation. The consumer price index (CPI) increased by 0.2% in October from the previous month. On a year-over-year basis, CPI increased 2.6% last month, after rising 2.4% in September. Core CPI, which excludes volatile food and energy prices, rose 0.3% month over month and 3.3% year over year.

The producer price index (PPI) also showed a 0.2% month-over-month increase in October, following a 0.1% rise in September. On an annual basis, PPI grew 2.4% in October, up from a 1.9% rise the previous month.

This has raised concerns about the economy’s strength, causing stocks to pull back from their recent highs. Despite inflation declining significantly over the past year, it remains above the Federal Reserve’s 2% target, which could prompt the central bank to reconsider its plans for future rate cuts.

Rate Cuts Pace May Slow

The ongoing market volatility is driven by concerns that the Federal Reserve may slow the pace of its rate cuts in the future. Since September, the Fed has reduced interest rates by 75 basis points, taking its benchmark rate to a range of 4.5-4.75%.

Last week, Federal Reserve Chairman Jerome Powell stated that the central bank doesn't need to rush into further rate cuts if the economic data supports a more measured approach. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully,” Powell commented.

Currently, markets are pricing in a 58.4% probability of a 25-basis-point rate cut in December, down from 76.7% a month ago. Given Powell’s hawkish remarks, the December rate cut may be a tight decision.

Moreover, if the economy remains robust, rate cuts in 2025 are expected to be slower, which could result in continued market volatility for an extended period.

3 Best Choices

We've identified three large-cap value mutual funds that have demonstrated 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).

Federated Hermes MDT Large Cap Value Svc fund's investment objective is to provide growth of income and capital. FSTKX pursues its investment objective by investing primarily in equity securities of companies that are generally leaders in their industries, are characterized by sound management and have the ability to finance expected growth.

FSTKX’s 3-year and 5-year annualized returns are 11.2% and 13.2%, respectively. Federated Hermes MDT Large Cap Value Svc fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.98%.

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

JPMorgan U.S. Applied Data Sci Val I fund seeks long-term growth appreciation. Under normal circumstances, JPIVX invests at least 80% of its assets in equity investments of large- and midcapitalization U.S. companies.

JPIVX’s 3-year and 5-year annualized returns are 8.9% and 11.8%, respectively. JPMorgan U.S. Applied Data Sci Val I fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.49%.

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

Dodge & Cox Stock I fund seeks long-term growth of principal and income. A secondary objective is to achieve a reasonable current income. DODGX invests primarily in a broadly diversified portfolio of common stocks.

DODGX’s 3-year and 5-year annualized returns are 8.6% and 13.9%, respectively. Dodge & Cox Stock I fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.51%, which is lower than its category average of 93%.

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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