The Wall Street rally has resumed after a brief pause, thanks to a steady decline in inflation that is giving investors’ confidence a boost. The Labor Department said last week that inflation declined further in June.

The consumer price index (CPI), a broad measure of prices for goods and services across the economy, declined 0.1% month over month in June, after remaining unchanged in May. This is the first time the monthly inflation rate has declined since May 2020.

On a year-over-year basis, CPI climbed 3% in June following a 3.3% increase in May, recording the smallest jump in the past 12 months. The June CPI reading also surpassed analysts’ expectations of a rise of 0.1% monthly and 3.1% year over year.

Core CPI, which strips out the volatile food and energy costs, increased 0.1% month over month in June and 3.3% year over year, surpassing economists’ expectations of a rise of 0.2% and 3.4%, respectively. The year-over-year rise in core CPI was the smallest since April 2021.

Currently, interest rates are at record-high levels. The Federal Reserve hiked interest rates by 525 basis points since March 2022 in its fight to bring down 40-year high inflation. The campaign worked with inflation declining sharply in 2023.

However, it resumed its climb in the first quarter, raising fears that the Fed could continue its monetary tightening campaign for longer.

The fears have once again ebbed as inflation is showing signs of cooling, raising hopes of a rate cut soon.

Earlier, the Federal Reserve's forecast for 2024 included three expected rate cuts, but it has since revised this to just one. However, even the projection of a single 25 basis point interest rate cut has been well-received, particularly because a large section of market participants had not anticipated any rate reduction this year.

Moreover, the latest FOMC "dot plot," suggests a planned cumulative interest cut of 1% by 2025.

This could bring the Fed funds rate down to 4.1% by the end of next year. Currently, financial markets are pricing in a rate cut in September, with the chance of another before the year concludes if inflation continues to decrease significantly.

3 Best Choices

We have, thus, selected three large-cap growth mutual funds, namely Fidelity Series Blue Chip Growth Fund (FSBDX Quick QuoteFSBDX - Free Report) , AB Large Cap Growth Fund (APGAX Quick QuoteAPGAX - Free Report) and Janus Henderson Research A (JRAAX Quick QuoteJRAAX - Free Report) , each carrying a Zacks Mutual Fund Rank #1 (Strong Buy). Each of these funds are poised to gain from the above factors. Moreover, these funds have encouraging three and five-year returns. 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 of the 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 Series Blue Chip Growth Fund invests in common stocks of blue-chip companies that generally have large or medium-market capitalization. FSBDX is non-diversified.

Fidelity Series Blue Chip Growth Fund (has a track of positive total returns for over 10 years. Specifically, FSBDX’s returns over the three and five-year benchmarks are 10.1% and 22.6%, respectively. FSBDX has an annual expense ratio of 0.01%.

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

AB Large Cap Growth Fund seeks long-term growth of capital by investing in a limited number of large, carefully selected, high quality U.S. companies. APGAX combines in-depth fundamental research on a company-by-company basis with opportunistic trading around core portfolio positions.

AB Large Cap Growth Fund has a track of positive total returns for over 10 years. Specifically, APGAX’s returns over the three and five-year benchmarks are 8.6% and 16.9%, respectively. APGAX has an annual expense ratio of 0.81%.

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 part of the Large Cap Growth mutual fund category. JRAAX invests in many large U.S. companies that are expected to grow much faster than the other large-cap stocks.

Janus Henderson Research A fund has had a track of positive total returns for over 10 years. Specifically, JRAAX’s returns over the three and five-year benchmarks are 10.3% and 16.9%, respectively. The fund’s annual expense ratio is 0.83%.

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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