Fund performance

The Conference Board Leading Economic Index rose 0.3% in August, following a 0.6% gain in July and a 0.3% increase in June.

A new report by the Investment Company Institute shows that over the past four months, a staggering $75 billion has been withdrawn from equity mutual funds.

Fears over a possible economic slowdown, sovereign debt and not enough capitalization at U.S. financial institutions sent the Global Association of Risk Professionals (GARP) Risk Index up 2.5 points to 110.5 in the second quarter. This is very close to the previous high reached in the third quarter of 2010.

Developing economies of the world are still showing robust growth, but that may not be enough to lift the sagging economies of the developed world, which still account for 60% of combined global economic output, warns Lin Yifu, a World Bank senior vice president and chief economist.

News of a possible double-dip recession and extreme stock market volatility prompted 40% of Americans to reduce their spending in the past 60 days, according to the September Bankrate Financial Security Index.

While 52% of registered investment advisors say a double-dip recession in the next six month is unlikely, their clients are nonetheless looking to reduce expense, cut back on discretionary spending and making more conservative investment choices, according to Charles Schwab’s 10th semi-annual Independent Outlook Study released Wednesday.

Forty-two percent of hedge fund managers became bearish on stocks in August, up markedly from 27% who were pessimistic in July, according to a survey by BarclayHedge and TrimTabs Investment Research. This is the largest percentage of bearish hedge fund managers in a year.

The constant barrage of bad news has eroded consumer, investor and business confidence to dangerously low levels.

A tip of the hat to Standard & Poor’s?

The spike in market activity and volatility spurred by the downgrade of U.S. debt, the debt-ceiling contratemps in Congress and the European sovereign debt overhang did not drive overall trading volume to record levels in August.

Even though the stock market has been extraordinarily volatile over the past month, most investors are not changing their allocations to stocks and bonds, according to the RCB Consumer Outlook Index.

Over the next five business days through Sept. 6, the Dow Jones Golden Crossover Large-Cap Total Stock Market Index will decrease its equity allocation from 100% to 25%, moving that 75% allocation into the cash equivalent of short-term U.S. Treasury bills.

Fears of another recession could prompt corporate Treasurers and lenders to withhold financing, which in and of itself could raise the probability of less liquidity and further economic weakening.

A trio of finance professors are blasting the big three rating agencies, Moody’s in particular, claiming in a new report that they've unearthed evidence that asset classes that provide the agencies with most of their revenue benefit from better credit ratings while classes that provide less revenue receive harsher treatment.

Despite their reputation for taking advantage of upsets in the markets, hedge funds wisely ran for the exit from stocks between 2007 and 2009, according to a report by Ohio State University’s Fisher College of Business Assistant Professor of Business Itzhak Ben-David. Ben-David conducted the study along with Rabih Moussawi of the Wharton School at the University of Pennsylvania and Francesco Franzoni of the Swiss Finance Institute and the University of Lugano.

Investors have developed a serious aversion to U.S. equity mutual funds, which is upsetting the balance of fund flows, according to Morningstar.

The correlation between stocks and the S&P 500 has reached a 20-year high of 0.73, up from 0.44 in July—posing a real challenge for individual fund managers, according to Goldman Sachs.

Both the Conference Board and the State Street confidence indexes plummeted in August, with the Conference Board Consumer Confidence Index falling 14.7 points from July, to a reading of 44.5, and the State Street Investor Confidence Index declining by 12.9 points, to 89.6.

While economists have predicted U.S. GDP growth of 3.1% over the next 12 months, Mellon Capital Management foresees growth of 2.0%—primarily due to government policy stalemates and the lingering impact of the debt crisis in Europe.

Two-thirds of donors are cutting back on their charitable giving due to economic worries, a survey by non-profit consulting firm Dunham+Company found. Another 10% plan to cut back entirely until the economy gets back on track.