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The recent report, from the Labor Department shows that initial claims for unemployment benefits went up by 22,000 to 231,000 for the week ending on May 4, exceeding the consensus estimate of 214,000. This marked the highest number of claims since August 2023. Continuing claims representing individuals who have already received government unemployment assistance increased by 17,000 to reach 1.785 million for the week ending on Apr 27. These numbers highlight a rise in joblessness, indicating challenges for the economy.
Following this data, there has been growing speculation about interest rate cuts by the Federal Reserve. As the central bank closely monitors indicators such as labor market trends, the recent uptick in jobless claims could lead to discussions about easing monetary policy measures to boost economic growth. It is anticipated that the central bank will begin to lower interest rates in September.
A lower interest rate boosts the stock market by stimulating economic activity through reduced borrowing costs for individuals and businesses. This leads to increased investment in innovation and growth potential. With borrowing becoming more affordable, companies can reinvest capital in research, development and expansion initiatives, driving up their profitability and ultimately contributing to overall market gains.
Given the current economic landscape, considering investments in growth mutual funds could offer opportunities for long-term capital growth. These funds focus on growth and diversification across sectors and market capitalizations across sectors and market sizes thereby reducing the impact of market volatility.
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) invests in equity securities of large-cap companies. DREVX advisors use fundamental analysis to create a broadly varied portfolio comprising growth stocks, value stocks or both.
Karen Miki Behr has been the lead manager of DREVX since Sep 22, 2021. Most of the fund's holdings were in companies like Microsoft Corp (7.7%), Apple Inc. (7.2%) and NVIDIA Corp. (5.7%) as of Dec 31, 2023.
DREVX's 3-year and 5-year returns are 15.4% and 17.9%, respectively. The annual expense ratio is 0.69%. 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) invests most of its assets in equity securities of mid-cap companies that fall within the range of the Russell MidCap Index. PEMGX advisors also choose to invest in foreign securities.
Bill 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. (5.7%), Brookfield Corp (5%) and Copart, Inc. (5%) as of Jan 31, 2024.
PEMGX's 3-year and 5-year returns are 8.8% and 13.5%, respectively. The annual expense ratio is 0.95%. PEMGX has a Zacks Mutual Fund Rank #1.
AMG GW&K Small/Mid Cap Core Fund (GWGIX - Free Report) invests most of its net assets, plus the amount of any borrowing in equity securities of small and mid-cap companies. GWGIX advisors also choose to invest in common and preferred stocks.
Jeffrey W. Thibault has been the lead manager of GWGIX since Feb 26, 2017. Most of the fund's holdings were in companies like RBC Bearings Inc (2%), CyberArk Software Ltd. (1.9%) and BJ's Wholesale Club Holdings, Inc. (1.8%) as of Dec 31, 2023.
GWGIX's 3-year and 5-year returns are 5.6% and 12.8%, respectively. The annual expense ratio is 0.87%. GWGIX has a Zacks Mutual Fund Rank #1.
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3 Growth Mutual Funds to Buy on Rate Cut Optimism
The recent report, from the Labor Department shows that initial claims for unemployment benefits went up by 22,000 to 231,000 for the week ending on May 4, exceeding the consensus estimate of 214,000. This marked the highest number of claims since August 2023. Continuing claims representing individuals who have already received government unemployment assistance increased by 17,000 to reach 1.785 million for the week ending on Apr 27. These numbers highlight a rise in joblessness, indicating challenges for the economy.
Following this data, there has been growing speculation about interest rate cuts by the Federal Reserve. As the central bank closely monitors indicators such as labor market trends, the recent uptick in jobless claims could lead to discussions about easing monetary policy measures to boost economic growth. It is anticipated that the central bank will begin to lower interest rates in September.
A lower interest rate boosts the stock market by stimulating economic activity through reduced borrowing costs for individuals and businesses. This leads to increased investment in innovation and growth potential. With borrowing becoming more affordable, companies can reinvest capital in research, development and expansion initiatives, driving up their profitability and ultimately contributing to overall market gains.
Given the current economic landscape, considering investments in growth mutual funds could offer opportunities for long-term capital growth. These funds focus on growth and diversification across sectors and market capitalizations across sectors and market sizes thereby reducing the impact of market volatility.
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) invests in equity securities of large-cap companies. DREVX advisors use fundamental analysis to create a broadly varied portfolio comprising growth stocks, value stocks or both.
Karen Miki Behr has been the lead manager of DREVX since Sep 22, 2021. Most of the fund's holdings were in companies like Microsoft Corp (7.7%), Apple Inc. (7.2%) and NVIDIA Corp. (5.7%) as of Dec 31, 2023.
DREVX's 3-year and 5-year returns are 15.4% and 17.9%, respectively. The annual expense ratio is 0.69%. 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) invests most of its assets in equity securities of mid-cap companies that fall within the range of the Russell MidCap Index. PEMGX advisors also choose to invest in foreign securities.
Bill 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. (5.7%), Brookfield Corp (5%) and Copart, Inc. (5%) as of Jan 31, 2024.
PEMGX's 3-year and 5-year returns are 8.8% and 13.5%, respectively. The annual expense ratio is 0.95%. PEMGX has a Zacks Mutual Fund Rank #1.
AMG GW&K Small/Mid Cap Core Fund (GWGIX - Free Report) invests most of its net assets, plus the amount of any borrowing in equity securities of small and mid-cap companies. GWGIX advisors also choose to invest in common and preferred stocks.
Jeffrey W. Thibault has been the lead manager of GWGIX since Feb 26, 2017. Most of the fund's holdings were in companies like RBC Bearings Inc (2%), CyberArk Software Ltd. (1.9%) and BJ's Wholesale Club Holdings, Inc. (1.8%) as of Dec 31, 2023.
GWGIX's 3-year and 5-year returns are 5.6% and 12.8%, respectively. The annual expense ratio is 0.87%. GWGIX 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 >>