Sig, What a storm! I am glad that you and Patsy are okay. Was that Tornado named Abby? It is a good thing that she has been bullish on Dell! :)Leigh
Filed at 4:46 p.m. EST
By The Associated Press
NEW YORK (AP) -- Abby Joseph Cohen spoke, so Wall Street listened.
Cohen, the famously bullish chief investment strategist at Goldman Sachs Group Inc., recommended Tuesday that her firm's clients reduce their allocations of stock in favor of some added cash. The move, which many on Wall Street interpreted as a sign of flagging optimism, caused a broad decline in stocks.
``She's the best known market guru, and she's been right for a long time,' said Larry Wachtel, market analyst at Prudential Securities. ``She represents a major power on Wall Street, and she's earned her respect.'
Cohen told clients Tuesday morning that Goldman Sachs was reducing its weighting of stocks in its model portfolio. The firm now recommends that investors seeking an ``aggressive balanced' portfolio put 65 percent of their money in stocks, 27 percent in bonds, 3 percent in commodities and 5 percent in cash. Previously, Goldman recommended a 70 percent allocation of stocks, with no cash holdings.
Cohen's shift sparked selling from the start of Tuesday's session. The Dow Jones industrial average fell 89.74 to close at 10,936.11, the Standard & Poor's 500 fell 16.13 to 1,507.73 and the Nasdaq composite index fell 124.56 to 4,834.00.
Cohen said the shift was due to concerns that the market's rise in the past few weeks has left certain sectors with little room to advance. Chief among them: technology stocks.
``For the first time in a decade, our model portfolio is no longer recommending an overweighted position in technology,' she said. ``Many of the technology shares were given the respect they deserve over the last 18 months, and are no longer undervalued.'
``Overweight' means that Goldman's portfolio carries greater exposure to a sector than the broad Standard & Poor's 500 index. Cohen held her recommended exposure in technology and telecommunications stocks to 35 percent of a stock portfolio, while those sectors represent 42 percent of the S&P 500.
The sector most overweight, Cohen said, is now financial stocks, including banks, credit card lenders and insurance companies. Basic materials companies and energy stocks also have a heavier representation in her model portfolio.
Cohen, whose name has become nearly synonymous with the bull market on Wall Street, said her shift was prompted by market gains that have already brought major indexes close to her yearend estimates. Last week, Cohen raised her yearend target for the S&P 500 to 1,575 from 1,525 and her target for the Dow to 12,600 from 12,300.
``This is in response to the rise in stock prices,' she said. ``Our views on the longevity of the current economic and profit expansion are unchanged.'
Cohen expects the S&P 500 to reach 1,625 within 12 months. |
