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To: Larry S. who wrote (47358)	3/28/2003 8:06:10 AM
From: Kelvin Taylor	Respond to of 53068

Fund Managers Trim Stocks as War Rolls On 30 minutes ago Add Business - Reuters to My Yahoo! By Svea Herbst-Bayliss BOSTON (Reuters) - As the war in Iraq (news - web sites) moved into its second week, U.S. fund managers worried about taking new risks and moved money out of U.S. stocks and into U.S. bonds or cash in late March, a new Reuters poll shows. While many managers felt U.S. equities were a good place to be in February during the buildup to war, they shifted course this month when the long-expected battles began. U.S. stocks have given back some of their recent gains amid news that U.S. and British troops are being hampered by blinding sandstorms and fierce Iraqi resistance. Many asset allocators said they see few attractive investment options right now. "There is a sense that people are unwilling to take big bets anywhere and that is all part of the greater geopolitical concerns," said Jeffrey Palma, a member of the asset allocation team at UBS Warburg. "Making an asset allocation decision just doesn't make much sense considering the risk of market reversals now." U.S. fund managers have made some relatively dramatic moves since January, and March's numbers illustrate key themes, including the steady increase in cash holdings plus slightly more interest in emerging markets and less interest in Japan. But most remarkable, say analysts, is the sharp shift in money allocated to U.S. stocks. Now the 9 money managers who responded to the Reuters poll, compiled between March 25 and 27 and released on Friday, hold only 49.2 percent of their stock portfolio in U.S. equities, down from 53.2 percent in February but still up from 48.3 percent in January. "The ultimate question on everyone's mind is whether this war will change the attractiveness of the U.S. and you don't get the same answers two days in a row," said Arnim Holzer, investment strategist for the global asset allocation group at Deutsche Asset Management in New York. With money managers fixated on news headlines about the war, several strategists worried that some were making too many moves too quickly right now. Many remain convinced the U.S. stock market is the best place to be in the longer term, given the stimulus created by the softer dollar and other factors. But even these optimists expect the next weeks, or months, to be shaped by more volatile moves with another earnings season around the corner and no signs that the war is near its end. "The United States has the policy levers and they are more powerful here than anywhere else. The U.S. will be able to grow out of this. That doesn't mean that it will be a straight line or that there won't be disappointments however," Holzer said. In light of current jitters, many asset allocators preferred bonds to stocks, in part because bond returns have only one main driver -- what central banks will do next. Industry heavyweights like Deutsche Asset Management, UBS Warburg and American Express, who manage billions for their clients, raised their allocation to U.S. debt to 32.4 percent from 30.2 percent in February and 29.8 percent in January. "If we look back at what the outlook for U.S. interest rates will be, it is likely that the Federal Reserve (news - web sites) will be on hold for the next 6 months," UBS' Palma said. While some investors expect the next Fed move to be an interest rate hike, they say that likely won't happen soon considering some still-sluggish economic data. There is also no need to worry about rising inflation, in spite of news that consumer prices posted their biggest rise in two years in February, economists said. After stripping out the volatile food and energy components, the index was up only 0.1 percent. Still, some asset allocators said European government bonds might do better in the longer run, if the European Central Bank is still poised to cut rates more than the Fed will.