For the second time this year, Standard & Poor’s Investment Policy Committee suggests that investors reduce the equity portion of their portfolios.

S&P says that investors should cut their equity exposure to 55% from 60%, and increase their cash holdings to 25% from 20%. “We expect improvement in the market later this year and into 2003, assuming earnings don’t fall too far short of estimates and worries subside somewhat,” says Sam Stovall, senior market strategist, S&P’s Investment Services. “For the near term, though, stocks may remain under pressure, and moving into the summer season, which typically is a softer period for stocks, only adds to that pressure.”

S&P notes that investor confidence will continue to suffer from the threat of additional terrorism, a possible war with Iraq, ongoing tensions between India and Pakistan, the impasse in the Middle East, and the damaged credibility of U.S. corporations and Wall Street.

Given the current uncertainties, Standard & Poor’s believes it would be prudent for the average investor to increase cash reserves that can be utilized as opportunities in the market arise later on. The suggested bond portion of investors’ portfolios remains unchanged, at 20%.