Rising inflation and fears of a trade war owing to Trump’s proposed tariffs on the United States’s biggest business partners have been contributing to a decline in consumer sentiment. Market volatility has been evident since the start of the year.

The Federal Reserve also decided to leave interest rates unchanged during its January policy meeting in response to an unexpected increase in inflation during the last quarter of 2024.

It would thus be safe to invest in large-cap value funds. We suggest investing in three large-cap value funds, namely, TIAA-CREF Large Cap Value Fund (TCLCX Quick QuoteTCLCX - Free Report) , VALIC Company I Systematic Value Fund (VBCVX Quick QuoteVBCVX - Free Report) and Shelton Equity Income Investor (EQTIX Quick QuoteEQTIX - Free Report) .

Consumer Sentiment Declines

On Friday, the University of Michigan’s Consumer Sentiment Index showed a reading of 67.8 in February, a sharp decline from January’s final reading of 71.1. This marked the lowest sentiment in seven months. The sharp drop is primarily due to mounting worries over rising inflation in the coming months.

The consumer expectations index for inflation over the next year increased to 4.3% in February from 3.3% in January, the highest level since November 2023. The five-year inflation outlook also rose to 3.3% from 3.2%, reaching the highest level since June 2008.

Fed Struggles to Bring Down Inflation

Consumer sentiment remained resilient through the second half of 2024, thanks to the Federal Reserve’s first rate cut in four years after hiking rates by 525 basis points since March 2022 to combat inflation. However, the unexpected surge in inflation in late 2024 complicated the Fed’s efforts to reach the Fed’s 2% inflation target.

As a result, the Federal Reserve has kept interest rates steady in its January meeting in the current range of 4.25-4.5%. The initial consumer sentiment reading period ended on Feb. 4, the same day Trump temporarily halted his planned 25% tariffs on Canadian and Mexican imports.

Despite the month-long pause, there is still uncertainty regarding Trump’s long-term tariff strategy. This uncertainty has escalated fears of a potential trade war, which has been further weighing on consumer sentiment and prolonging market volatility. The markets are expected to remain turbulent until the next rate cut, as higher borrowing costs continue to impact various industries.

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).

TIAA-CREF Large Cap Value Fund invests the majority of its assets in bonds, including different types of fixed-income securities. The fund’s portfolio is divided into two segments. The first segment holds more than 70% of TCLCX’s assets that are invested in a wide variety of fixed-income securities and investment-grade bonds. The second segment has around 30% of its assets invested in fixed-income debt securities with special qualities.

TIAA-CREF Large Cap Value Fund has 3-year and 5-year annualized returns of 6.6% and 9.6%, respectively. TCLCX has an annual expense ratio of 0.71%, which is lower than its category average. TCLCX 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.

VALIC Company I Systematic Value Fund primarily invests in equity securities of U.S. large- and mid-cap companies, selected on their inclusion on the Russell 1000 Value Index, which identifies companies with value characteristics such as lower price-to-book ratios and lower expected growth values.

VBCVX’s 3-year and 5-year annualized returns are 6.6% and 9%, respectively. VALIC Company I Systematic Value Fundhas 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.

Shelton Equity Income Investor fund seeks to achieve a high level of income and capital appreciation by investing primarily in income-producing U.S. equity securities. EQTIX invests primarily in securities that generate a relatively high level of dividend income and have the potential for capital appreciation. Shelton Equity Income Investor fund also invests at least 80% of its total assets in stocks.

EQTIX’s 3-year and 5-year annualized returns are 7.4% and 10.9%, respectively. Shelton Equity Income Investor fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.67%, 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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