Record week for equity funds as inflows hit £16.2bn

Last week saw a record breaking £16.2bn flow into into equity funds. Funds in developed markets experienced the bulk of the inflow posting £15.4bn while funds in developing nations saw an inflow of £1bn, according to data from EPFR Global. The inflows were the largest ever recorded in the EPFR data set.

The move into equity funds came before the Federal Reserve's decision to continue it's programme of monetary stimulus. Bond funds however suffered an outflow of £1bn. Following from the Federal Reserve's decision to delay tapering further inflows are expected in the coming weeks as markets remain stable

Stock markets surged as did gold prices following the announcement that the Fed would delay tapering. The Fed reinforced it's doubts over the strength of the US economic recovery downgrading growth by 0.3 per cent, projecting growth of 2.3 per cent.

Federal Reserve chairman Ben Bernanke also warned of the potentially damaging impact of political fights over the debt ceiling which may have had an impact on the committee's decision

The extent of restrictive fiscal policies remains unclear, and upcoming fiscal debates may involve additional risks to financial markets and the broader economy.

While stock markets may be jubilant and equity funds experiencing record inflows, economists such as Shaun Woodward warn that the Fed's extraordinary measures may be creating new bubbles and that the Fed''s reliability in terms of forward guidance is highly questionable after its failure to begin tapering in September.