Some money managers say they will remain cautious in the run-up to January 1 by holding extra cash or other investments perceived as safe bets.

But if the change to the year 2000 creates few hiccups, they expect it to unleash pent-up demand for riskier assets and lead funds to beef up allocations for stocks and higher-yielding debt securities, such as junk bonds.

US fund managers expect the first relief rally of the new millennium to begin almost as soon as investors are assured their computers and telephones still work.

That could add a serious kick to the "January effect" - seasonal factors that tend to boost markets in the first month of the year due to increased flows into pensions, bonuses and reinvestments of coupon payments.

"Coincidentally, the end of the year and the first couple of months are heavy cash inflow months as people replenish their 401Ks and IRAs," said Roberto Plaja, vice president of global fixed income and global asset allocation at JP Morgan Investment Management Inc.

"So with the double hit from lifting of spirits from fears of Y2K and the seasonals, the expectation is you are going to see fairly well-supported markets," added Plaja, who oversees $160 billion in assets. Some investors predict markets will stall around mid-December while players hold their breath, dreading some cataclysmic computer crash at the dawn of the new year.

But US officials are playing down the possibility of major disruptions to the national infrastructure from the Y2K bug - caused by antiquated software programmes that render some computers unable to distinguish between the year 2000 and 1900 because they read years using only the last two digits.