Wall Street has remained volatile over the past two months, while investors continue to face uncertainty over the Federal Reserve’s next moves on monetary policy. This has seen Americans become less confident about the economy’s health in recent months.

Rising cost of living, elevated inflation and continued geopolitical tensions in the Middle East are weighing on consumer sentiment.

Given this backdrop, investors may consider large-cap value funds, such as Vanguard Equity Income Fund (VEIPX Quick QuoteVEIPX - Free Report) , Northern Income Equity (NOIEX Quick QuoteNOIEX - Free Report) and Federated Hermes MDT Large Cap Value Svc (FSTKX Quick QuoteFSTKX - Free Report) .

Consumer Sentiment Weakens

The University of Michigan's Surveys of Consumers reported last week that its Consumer Sentiment Index declined to 51 in August from 55.2 in July. The reading was also below economists’ forecast of 54.5.

August marked the first decline in consumer sentiment in three months. Meanwhile, consumers’ expectations for inflation over the next 12 months jumped to 4.3% from 4.2% in July. Long-term inflation expectations, measured over five years, remained unchanged at 3.3%.

Concerns about the health of the economy continue to weigh on consumer confidence. Although inflation has moderated over the past two months, it remains well above the Federal Reserve’s 2% target. Oil prices have also pulled back recently after climbing more than 40%, following the outbreak of the Middle East conflict earlier this year.

Despite the recent decline, energy prices remain significantly elevated. At the same time, the conflict between the United States and Iran remains unresolved, with no clear indication that negotiations between the two countries are imminent.

The Federal Reserve kept interest rates unchanged following its July FOMC meeting. While the central bank is expected to deliver a quarter percentage point rate hike this year, the timing remains uncertain. Continued uncertainty could keep markets volatile for an extended period, particularly if consumer confidence remains weak.

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).

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 15.5% and 11.7%, respectively. Vanguard Equity Income Fund has a Zacks Rank #1 and an annual expense ratio of 0.26%.

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

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 19.9% and 13.5%, respectively. Northern Income Equity fund has a Zacks Rank #1 and an annual expense ratio of 0.48%, 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.

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 22.5% and 15.2%, respectively. Federated Hermes MDT Large Cap Value Svc fund has a Zacks Rank #2 and an annual expense ratio of 0.99%.

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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