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S&P: Reduce Bond Exposure

Standard & Poor's believes the recent fiscal and monetary stimulus -- including the Federal Reserve's interest rate cut on June 25 -- will lead to a strengthening economy, which, in turn, may increase the risk of inflation and pressure bond prices. And that has prompted Standard & Poor's

Investment Policy Committee -- a group of senior managers who meet weekly to oversee all investment-related activity done in S&P's name -- to change its asset-allocation recommendation for investors.

The committee voted on June 25 to lower its recommended bond exposure to 10% from 15% and raise its suggested cash allocation to 25% from 20%. The recommended equities allocation remains at 65%.

The IPC's move follows prior boosts to recommended equity exposure in December and August, 2002. The committee lowered the recommended stock allocation in both April and June, 2002.

The committee also believes that the historically slow summer months will allow investors to put increased cash reserves to work in the equity market at more attractive prices in the months ahead. The IPC believes that the S&P 500 will end the year at 1030, for a 17% 12-month gain. By the middle of 2004, it expects the "500" to reach 1105. From Standard & Poor's Investment Policy Committee

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