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Monday, September 24, 2001

Today's Guest: Donald M. Belt, senior portfolio manager, Hefren-Tillotson, Downtown (donbelt@hefren.com)

What should we make of how the markets are acting? The U.S. capital markets are adjusting to a downward revision of growth estimates due to the terrorist attack on Sept. 11th. With the economy struggling to avoid recession prior to the attacks, it appears the recent tragedy will depress economic activity further and delay any hopes in a near-term rebound in the economy. Consequently, the profit picture for U.S. companies will continue to deteriorate in the near term.

How long do you think the sell-off will last? We believe the severity and length of the decline in U.S. markets will depend on the following: 1) Consumer confidence and spending -- Spending and the confidence of consumers will determine the near-term direction of the U.S. economy; 2) Degree of action by monetary authorities -- Benefits of action will serve to instill confidence in the U.S. financial system more than impact near-term economic fundamentals; 3) Speed and extent of response from U.S. military -- Resolution of conflict.

Are there any 'must-buy' companies and industries out there? At current market levels, we recommend investors balance new equity purchases between the following: Defensive purchases -- Pfizer (PFE), Kraft (KFT), SunGard Data (SDS), CVS Corp. (CVS); Opportunistic purchases -- Tyco International (TYC), AOL Time Warner (AOL), United Parcel (UPS)

What is your current recommendation for portfolio allocation? Investors should ensure proper liquidity to meet short-term needs, adequate bond investments to produce necessary income and equity investments to provide long-term growth potential. At this juncture, we believe it to be unwise to make drastic shifts in strategy in response to the current market sell-off.