The Standard & Poor’s Investment Policy Committee is recommending that investors lower their exposure to U.S. equities while increasing their cash position.

S&P’s recommended portfolio allocation is now 45% U.S. equities (reduced from 50%), 10% non-U.S. equities, 35% cash (increased from 30%) and 10% fixed-income investments.

“Standard & Poor’s believes that a deterioration in technical and fundamental factors, in response to second quarter earnings and uninspiring price action on light volume, will cause markets to trend lower in the near future,” says Sam Stovall, chief investment strategist, Standard & Poor’s.

“We feel that the renewed embrace of defensive stocks and the lack of follow-through after Alan Greenspan’s testimony and Microsoft’s favorable change in dividend policy, is an indication of market weakness ahead.”

The Investment Policy Committee’s year-end 2004 target 500 remains at 1,210 for the S&P 500, and 2,180 for the Nasdaq, representing 9% full-year price increases for both benchmarks.