4 Large-Cap Funds To Buy As Inflation Spike Seems Unlikely

Per the latest data by Bureau of Labor Statistics, Consumer Price Index (CPI) came in above the consensus estimate and spiked fears regarding a possible rate hike due to a surge in inflation. However, the index appears largely inflated especially after considering the fact that the index in general, as well as after-excluding food and energy prices, has not shown much increase year over year.

Under such circumstances, when a spike in inflation and therefore rate hikes in the near future seem highly unlikely, investors must consider putting their money in large cap-mutual funds.

CPI Data is Overblown

The U.S. CPI came in at 0.5% for the month of January, surpassing the expectations of 0.3% growth. The Core CPI, which excludes food and energy prices in the economy, grew 0.3% for the month, above the consensus estimate of 0.2% growth. Such apparently “impressive” data spiked fears among investors that inflation might shoot up to perilous levels.

Upon closer examination, one finds that CPI improved just 2.1% year over, which remains the same as December. A monthly spike in the index can be attributed to seasonal fluctuation after the holiday season. Food prices increased 0.2%, whereas prices of fuel oil surged 9.5% post-holidays.

Considering such factors, rest assured that inflation is not set to shoot up anytime soon. This claim is further supported by the fact that even the Core CPI increased a meager 1.8% year over year last month, remaining well below the 2% target level.

Wage Growth, a Seasonal Impact

According to the U.S. Bureau of Labor Statistics, average hourly earnings rose by 0.3%, or 9 cents, to $26.74 in January, up 2.9% for the year, marking its highest yearly growth since mid-2009. Average hourly earnings for sectors like manufacturing, construction, and restaurant rose 3 cents each. Some other industries like information, professional and business services, and education and health services saw an average hourly increase of 21 cents, 18 cents and 11 cents, respectively. Further, private-service providers generated average hourly earnings of 10 cents.