3 Large-Cap Value Funds for Refuge Amid Prevailing Market Volatility

Given this backdrop, investors may consider large-cap value funds, such as Vanguard Equity Income Fund VEIPX, Northern Income Equity NOIEX and Federated Hermes MDT Large Cap Value Svc FSTKX.

Wall Street Faces Renewed Volatility

Oil prices have climbed more than 5% since the United States resumed strikes on Iran earlier this month after President Donald Trump declared that the ceasefire was "over." On Wednesday, crude prices rose further as investors saw no signs of the hostilities ending anytime soon.  Energy prices rose after Secretary of State Marco Rubio said that Iran is “not serious about talks.”

West Texas Intermediate crude settled 3% higher at 86.83 a barrel, while Brent crude, the global benchmark, gained 3.4% to close at $94.07 per barrel.

Inflation cooled significantly in June after the United States and Iran reached a temporary memorandum of understanding to halt hostilities. The Consumer Price Index (CPI) fell 0.4% month over month in June after rising 0.5% in May, marking the steepest monthly decline since April 2020.

On an annual basis, CPI slowed to 3.5% in June, below economists' expectations of 3.8% and down from 4.2% in May. Still, concerns are mounting that inflation could accelerate again if oil prices continue to rise amid the renewed conflict between the United States and Iran. Markets have already experienced heightened volatility over the past month, driven by a sharp sell-off in technology stocks as investors reassess the lofty valuations of AI-related companies.

Although inflation eased in June, it remains well above the Federal Reserve's 2% target. Persistently elevated inflation continues to complicate the Fed's policy outlook, with the central bank still considering another interest rate increase before the year-end.

Financial markets are currently pricing in a 25-basis-point rate hike later this year. Higher interest rates would increase borrowing costs, potentially weakening consumer spending and putting additional pressure on the broader economy.

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 15.9% and 11.2%, respectively. Vanguard Equity Income Fund has 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 20.9% and 13.7%, respectively. Northern Income Equity fund has 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 Sv cfund'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 22.2% and 14.3%, respectively. Federated Hermes MDT Large Cap Value Svc fund has 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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