Ms Abby Joseph Cohen, the Goldman Sachs strategist whose positive attitude to US equities has helped underpin the bull market, has recommended a cut in investors' exposure to shares.

Ms Cohen, chair of Goldman's investment policy committee, also warned investors this week to expect volatility "well above the levels experienced between 1992 and 1997".

Publication of Ms Cohen's latest report provoked a momentary downward lurch in share prices at Wall Street's opening on Tuesday, although stocks bounced back in later trading.

Since the end of last year, Ms Cohen's comments on the US bull market have become subtly more bearish. She pointed out last November that shareholders would have to get choosier in 2000 to achieve the same returns as they had managed in previous years. But Ms Cohen remains far more bullish than some of her counterparts at other Wall Street investment banks. Last week, she increased her target range for the Standard & Poor's 500 for the end of this year and next.

She believes the S&P500 will trade around 1,575 at the end of this year, the equivalent of 12,600 on the 30-stock Dow Jones Industrial Average. J.P. Morgan has an end-year target of 1,300 for the S&P500. The S&P500 broke through 1,500 last week.

Ms Cohen said in the note issued with Ms Gabrielle Napolitano, another Goldman analyst, that they were reducing the recommended equity exposure in the bank's model portfolio "in response to the rise in stock prices", which would lead to "less vigorous" stock-price gains of 810 per cent annually. But the analysts added: "Our views on the longevity of the current economic and profit expansion are unchanged."

The adjustment puts the Goldman portfolio back to a "normal" weighting of 65 per cent equities, 27 per cent bonds, 3 per cent commodities and 5 per cent cash. The previous weighting was 70 per cent equities and no cash.

The recommendation is still more aggressive than other Wall Street houses: Merrill Lynch recommends only 50 per cent in stocks and 15 per cent in cash.

Goldman had been equity-heavy since September 1998, when investors reacted to the Russian debt crisis. At that time, Ms Cohen called for calm, suggesting that US markets were undervalued.