Investors’ confidence in U.S. markets and the economy is slipping, with 48% of investors polled expressing bullish sentiments about the markets, compared with 57% in May 2009, according to the latest MoneyShow.com Investors’ Sentiment Indicator. The number of bearish investors has increased to 34% from 28% since the last poll in May.

Investors’ favorite asset class is commodities: Some 32% of those polled say commodities will perform best for the rest of this year. They also like foreign stocks (24%) and small/mid-cap U.S. stocks (19%).

Investors expect inflation to remain constant (51%), while 78% of those polled don’t see the end of the U.S. recession until 2010 or later. A majority - 52% - thinks we’re in a volatile market that won’t make big moves either way, while 32% believe we are in a bear market rally and stocks will make new lows.

On other topics, some 56% of investors said they expect Congress to pass some form of health care reform by the end of 2010. An overwhelming majority, 82%, also expects their state and federal taxes to rise significantly over the next year or two.

The MoneyShow.com Investors’ Sentiment Indicator polled 767 investors from its member list between August 14 and August 19, 2009. The complete findings of the Investors’ Sentiment Indicator will be available on MoneyShow.com, and they will be announced at The MoneyShow in San Francisco, California.