Fund executives and portfolio managers are sounding off again in the latest round of annual and semi-annual reports recently filed for the period ended June. While many foresee a moderate economic slowdown, some fear a bear market is on the way.

In their letters to shareholders, many managers detail, and, in some cases, defend, their funds' performance, while also covering domestic markets, the U.S. economy and the Federal Reserve Board.

To describe the volatility of the U.S. stock market so far this year, many managers have turned to colorful adjectives, portraying it as "volatile," "choppy," "erratic," "tumultuous" and even as "a bumpy roller coaster ride."

Robert P. Morse, chairman and president of Wall Street Management of New York, tagged it as "confused."

Another manager offered a sobering view: "The financial markets both globally and here in the U.S. careened and skidded to a disappointing mid-year pause," said Robert J. Markman, chairman and president of Markman Multi-Fund Trust of Minneapolis.

"What was surprising was the fact that this volatility unfolded in the face of virtually no change in the underlying fundamental in global and domestic markets," Markman continued. "By most major broad measures-growth, inflation, interest rates, energy and commodity prices-little happened that would be cause for alarm." Rather, influences outside of the markets are cause for concern. "Geopolitical uncertainty continues to be the wild card much feared by the financial markets," he added.

It's a confluence of factors that has spooked investors, said Neil Hennessy, president and portfolio manager of the Hennessy Funds managed by Hennessy Advisors of Novato, Calif. "With record-high gas prices, higher interest rates and a slowdown in the appreciation of home prices, many consumers may be feeling a little less wealthy and pulling back on their spending," he surmised.

On the economic front, many expressed guarded optimism.

"While the economy is set to moderate, we maintain our forecast view that this is a normal slowdown that will not lead to a more pronounced slowdown," said the five portfolio managers at Rochdale Investment Trust of New York. "The economic risks we see are only part of the potential concerns facing equities over the next year, given the uncertain geopolitical events unfolding around the world," they wrote.

"Stubbornly high oil prices, a fragile housing market or a Federal Reserve that is becoming increasingly more data dependent, could derail the economy later in the year," predicted Mark Boyar, chief investment officer of Boyar Asset Management of New York. Boyar points to historical data on market performance during various cycles of a president's reign. "The second year of a U.S. president's four-year term is the worst in regard to stock market performance," he noted.

Gloom and doom was present in the second quarter report of the Z-Seven Fund. In his letter, Barry Ziskin, the president of the fund's advisor, Top Fund Management of Mesa, Ariz., said that looking ahead to 2007, he's reading the paw prints on the wall. He predicts "a new and potentially very long and very deep bear market."

Many managers debated whether The Federal Reserve had stopped raising interest rates after 17 incremental increases since June 2004. Others were assessing the damage of these inflation-fighting efforts, while still others were obsessing over the Fed itself.

"In recent months, the financial markets have maintained a narrow focus on Federal Reserve policy, in hopes that an end to the recent tightening cycle will benefit the stock and bond markets," noted Dr. John P. Hussman, manager of the three Hussman Funds of Ellicott City, Md. But the bigger concern, he said, is "the massive and growing current account deficit [that] poses the greatest challenge to both U.S. growth and price stability ahead."

But Morse defended the Fed's balancing act, writing, "The Fed does have a very narrow path to tread between fighting inflation and fostering economic growth."

Finally, new Fed Chairman Ben Bernanke was fair game for criticism.

Shannon Radke, president and portfolio manager of the Viking Funds of Minot, N.D., said Bernanke's "communication approach has not been impressive as he waffled back and forth on inflation and further rate hikes during several public appearances. The markets are never comfortable with the winds of uncertainty, and right out of the gate, he fanned those winds."

(c) 2006 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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