Also instrumental in the decision: the improvement in the quality of reported earnings per share, as well as the expected narrowing of the spread between the p-e ratio on operating earnings for the S&P 500 index with that for S&P Core Earnings from 18 percentage points in 2000 to two percentage points by the end of 2004.
As for the change in the bond recommendation, S&P believes that bond prices will likely suffer from the expected gradual rise in the yield of the 10-year note normally associated with a pickup in economic activity.
In its previous actions this year, the IPC voted on July 30 to reduce the recommended equity exposure to 60% from 65%. The suggested bond allocation was increased to 15% from 10%. Cash exposure was left unchanged at 25%. Also, it 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 IPC expects the S&P 500 to close 2003 at 1,085, and end 2004 at 1,190, for annual gains of 23% and 10%, respectively. From Standard & Poor's Investment Policy Committee