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The US mutual fund in-dustry represents over 50% of global investment fund assets under management (US$5trn versus ap-proximately $9trn). This is largely due to the concentration of domestically invested funds, mainly equity. Money continues to pour into the market, although it has slow-ed down a little since the re-cord-breaking inflows earlier in 1998. The Investment Company Institute (ICI) estimates that $20.5bn net new money flowed into eq-uity funds during May, versus $26.5bn in April. Whilst this is something of a slow down it is important to remember that these statistics have tend-ed to be revised upward (in-deed, ICI are pulling the estimates as of June). For the same period, bond fund as-sets saw inflows of $7.5bn versus $4.3bn in April.

The upsurge in bond fund investment against equity/ mixed fund investment re-flects a growing level of un-certainty about how much further US equity prices can climb as a whole, and the re-cent volatility from continued currency problems and economic turmoil in Asia, especially Japan, will probably reinforce such concerns. It is also important to remember that April tends to be a high investment month as invest-ors start putting their money back to work having cleared their taxes. Even despite these concerns, equity funds still seem likely to see considerable inflows. Although recent events have tested the optimism of many investors, there is still a growing trend across the entire spectrum of US investors to buy on the dips, and this factor has been im-portant in maintaining the momentum of the market even after some precarious days trading. How much this continues to be the case de-pends on just how bad the fall-out from Asia continues to be.

David Masters and Chip Norton are with S&P's Micropal in Boston

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