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A combination of favorable trends for the U.S. economy, corporate profits, and the stock market has led 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 Dec. 4 to increase the recommended equity exposure by five percentage points, to 65%, and reduce the cash portion to 20%, from 25%. The recommended bond allocation remains at 15%.
The IPC's move follows a prior boost to recommended equity exposure in August. It lowered the recommended stock allocation in both April and June, 2002.
The IPC believes that the S&P 500 and Nasdaq will advance 8% from current levels by mid-year 2003 and approximately 15% by year-end 2003 on a continued recovery in the U.S. economy, a rebound in corporate earnings and favorable historical patterns for the markets.
One other trend working in stocks' favor: The yield on the S&P 500 is twice as high as an average money market fund. From Standard & Poor's Investment Policy Committee