U.S. Real GDP is expected to grow 1.3% in 2011 and 2.5% in 2012. Broad-based expansion of consumer, business and export spending spurred real GDP growth to near 2.1%% in the third quarter. Headwinds from the sovereign debt crisis in Europe and the high likelihood of tightening in fiscal and tax policy in the U.S. have resulted in a slow forecast of 1.5% in the period spanning Q4 2011 to Q2 2012. However, economic growth is forecasted to accelerate gradually in the second half of 2012 when the euro-zone crisis is expected to gradually diminish. The Federal Reserve is conducting highly expansionary monetary policy, including the reinvestment of repayments on its bond portfolio, rock-bottom policy interest rates and a new $400 billion shift in its Treasury holdings that is estimated to bring down long-term rates marginally in the near term. However, core inflation has commenced rising, and overall inflation is forecasted to accelerate in the next year on the expected reemergence of rising commodity prices. As the euro-zone crisis gradually ebbs, and the U.S. economy demonstrates slow but sustained economic growth, the 10-year Treasury yield is expected to rise above 3% from its current lowest levels of the modern era.

Continued world economic and policy worries mentioned above resulted in a massive flight to quality during the third quarter. Treasury yields fell across all maturities and broad market indices produced a total return of +3.75% during the period. While the US Treasury market generated a robust +6.36% total return, all other sectors trailed. Corporate bonds in particular struggled to keep pace, falling far short of Treasury re turns by -5.5%. However, not all is lost for bond investors. The simple story is Treasury yields declined significantly, but corporate and municipal bond yields dropped only slightly. This creates an opportunity for investors seeking relatively higher yield s outside of Treasury securities. Given our outlook for ongoing economic growth (no recession) and still positive earnings growth we suggest long-term investors consider medium too higher-quality issuers in the utility, technology, and healthcare sectors. In the case of municipal buyers, our focus is on two areas: 1) General Obligations with strong collections and taxing capacity; and 2) Enterprise bonds, such as water, sewer, wastewater, and transportation.

During the third quarter, domestic equity markets as measured by the S&P 500 declined 13.9%. The flight to quality described above was not limited to bonds. Our measure of high quality stocks lost 7.4% while the lowest quality names fell 21%. Stable/defensive sectors such as utilities, consume r staples, technology, telecomm and healthcare were the best performers, with cyclical areas suffering substantial losses. Looking ahead, we believe the stock market will remain within a broad range until world economic issues are resolved. Gains will be less pronounced with more volatility surrounding economic events and earnings releases. However, given the market’s current position within that range, a near-term rally is possible. We urge investors to not get too defensive and focus on corporate fundamentals because many stocks were sold indiscriminately during the summer. Our sector weights are tilted toward energy and technology, which have excellent risk/reward characteristics. For defensive areas, we prefer consumer staples and healthcare. In terms of quality, we continue to avoid the lowest quality stocks.

The European struggle to find a path through the political maze to a sovereign debt solution continues to preoccupy the oversea s markets. It appears that the EUU leadership is finally accepting that measures well beyond the half-hearted European Financial Stabilization Fund will be necessary to stabilize markets, including support for banks to avoid a repeat of the 2008 market freeze-up. While company earnings outlooks have been ratcheted downward in all global regions, growth remains positive. Japan in particular is benefitting from rebuilding activity. The summer’s market scare has reversed the market preference for m ore cyclically sensitive stocks, with consumer staples, telecom and healthcare stocks doing much better than industrials or materials shares over the past quarter. This trend could reverse quickly if the outlook brightens on a sovereign debt solution, which could come in the current quarter. The EAFE index’s 19% drop over the summer has left valuations (P/E, book value, dividend yield and cash flow) at very attractive levels even on a reduced earnings outlook.

The funds are distributed by Unified Financial Securities, Inc. (Member FINRA) a wholly owned subsidiary of Huntington Bancshares, Inc. and an affiliate of Huntington Asset Advisors, Inc. the advisor to the Huntington Funds.

While believed to be accurate, the presented information is general in nature. Investors should consider their individual financial circumstances and the inherent risks of investing with their investment advisor. Contributors: Kirk Mentzer, Director of Research; George Mokrzan, Senior Economist; Madelynn Matlock, Director of International Investments.

The Fund's past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-253-0412.

The views expressed in this reprint are those of the author as of 10/09/2011, and are not intended as a forecast or as investment recommendations.