There have been several changes in the Mutual Fund industry over the last several months with the changes and in light of the large jump in unemployment, we're liable to face more changes.

A shift in US small cap exposure to large cap exposure has occured in many funds, and before this all ends I suspect that this trend could continue, given that small caps have been the market sweethearts for a while as the blue chip companies have been declining.

Loomis Sayles for example has a solid bond fund (NASDAQ: LSBRX)  which is well managed, and is currently offering a slightly more than 8% return on investments. While every investor understands that past performance isn't indicative of current performance, it is equally telling that Loomis Sayles Bond Fund is currently trading near their 52 week low and anyone who's a little skittish about the market might find some security in this fund versus investing in the open market.

There are other funds that can help you diversify your portfolio and offer some inflation protection, for instance, Pimco Commodity Real Return Strategy (and index) (DJI:^PCX)which invests in a variety of commodity futures and is backed by inflation-indexed securities.  While the fund is volitile, historically when stocks and bonds are having a poor year, commodities generally offer strong returns.  This also can help you avoid the stock market and invest in natural resources.

Mutual Funds are liable to have a difficult 2008 - increasing inflation, slow economy can create a very slow growth rate to most mutualfunds.   There are some sectors that will do well, health care for instance - but it's becoming cheaper and because of that, there are a couple of funds who invest in this sector that might be worth watching.  For instance T. Rowe Price Health Sciences (NASDAQ PRHSX) - focusing on cancer, diabetes, hepatitis B, HIV, Alzheimers - these underserved and undertrated diseases are coming more and more to the forefront, making funds like this more attractive in todays market.  This fund is getting near it's 52 week low and might be worth taking a look at for a longer haul investor.

With savings levels declining in the face of rising everyday costs, chances are that not a lot of 'new' money will be coming into most mutual funds.  Couple this with an increasingly aging (and nearing retirement) baby boomer group and the mutual fund outlook isn't all that positive unless you can find a niche product.