NEW YORK, March 12 (Reuters) - Fund management company Federated Investors cut its recommended asset allocation in stocks and raised the weighting to bonds as U.S. equities sagged to 12-year lows last week on dire economic data, the company said on Thursday.
Late last week, Federated, which had total assets under management of $407 billion at year end 2008, cut its recommended allocation in stocks to 58 percent from 61 percent and raised the proportion in bonds to 42 percent from 39 percent.
"We had the misfortune to neutralize this allocation last week as the flow of Washington, corporate and fundamental economic news was just so dreary," said Phil Orlando, chief equity market strategist with Federated Investors in New York in a telephone interview with Reuters on Thursday.
The current 58 percent weighting in stocks is neutral, down from a slightly overweight 61 percent weighting, which the company adopted in December. Then, "we felt stocks were pretty cheap, oversold and would start to trade up," bolstered by the incoming U.S. government's measures to support the financial system and economy, Orlando said.
Over the near term, Federated Investors remains wary that the massive support the government and Federal Reserve are providing to banks, manufacturers and securities markets may not give an immediate boost to an economy battered by the biggest financial crisis since the Great Depression.
"We certainly are maintaining a neutral asset allocation right now," despite stocks' rebound so far this week, Orlando said.
"We are concerned that this ... might just be a bear market rally as opposed to the start of the next bull market," Orlando said.
Within the allocation to bonds totaling 42 percent, Federated has "a modest underweight" in U.S. government-issued Treasuries and a "significant overweight" in high yield and investment grade corporate bonds, all made in the fourth quarter last year.
The U.S. economy is likely to lift out of recession some time in the second half of the year and the stock market should bottom earlier -- between now and June -- he expects.
Once the recession ends, there will be "a sustainable economic upsurge at that point in a lagged response to aggressive monetary and fiscal policy initiatives," Orlando said. (Reporting by John Parry; Editing by Kenneth Barry)
