Daily Data Flow: Stocks Beat Commodities and Bonds in September; Fed Chairman Bernanke Tries to Explain Purpose of QE3; Hedge Funds’ Returns Fall; “Fiscal Cliff” Worries Mount

Stocks Beat Bonds, Commodities With Longest Rally Since 2007 (Bloomberg)
Emerging markets led global stocks to the fourth monthly gain in September, the longest streak since 2007, handing equity investors better returns than bonds, commodities and the dollar. The MSCI All-Country World Index of equities rose 3.2% last month — including dividends, bringing its 2012 gain to 13%. The global economy is forecast to expand 2.2% this year, the slowest pace since the 2009 contraction, according to the median estimate of economists surveyed by Bloomberg.

Fed’s Bernanke Takes on Critics of QE3 (Marketwatch)
Federal Reserve Board Chairman Ben Bernanke tried Monday to respond to the fierce criticism and public unease that followed the Fed’s third round of bond purchases, known as quantitative easing part III (QE3). “We hope that, by clarifying our expectations about future policy, we can provide individuals, families, businesses, and financial markets greater confidence about the Fed’s commitment to promoting a sustainable recovery and that, as a result, they will become more willing to invest, hire and spend,” Bernanke said. In the face of public concern about the Fed’s policy, Bernanke said that even a star player of the Washington Nationals baseball team has asked him for the “scoop on quantitative easing.”

Hedge Fund Returns Worsen: Is ‘Enormous Unraveling’ Near? (CNBC)
The more stocks rise, the further behind hedge funds fall — with the industry lagging market returns by double-digit percentages. The change in fortune for hedge funds, which had trounced stock performance during the past two decades, has market insiders searching for answers. With roughly 8,300 active hedge funds, the financial crisis took an especially large toll new funds. This year is the third-worst performance to date since BofA began tracking hedges in 1994. Nevertheless, fixed income-based hedge funds have seen inflows of $38.8 billion this year, while equity funds have watched $7.4 billion move out.

End of Payroll, Bush Tax Cuts Top ‘Fiscal Cliff’ Fears: Study (Reuters)
If Congress does nothing and the United States plunges off the “fiscal cliff” in three months, taxes would rise for 90% of Americans due to automatic increases in income and payroll taxes, and other financial shocks, according to a report issued on Monday. Because Congress and the White House failed to reach a deal to cut the deficit by an additional $1.2 trillion for the next 10 years, the federal government is on track for draconian spending cuts in 2013 and beyond — unless there is agreement on an alternative before the end of the year.