According to experts, the positive news for 2010 is that the world will emerge from recession. However, affluent parts of the world are still hampered by debt and high unemployment, therefore much work is required for a return to previous levels. Governments must decide carefully when to withdraw the economic support they provided to keep the system afloat following the collapse.
Credit Suisse suggests that investors focus on American and European quality large cap equities, with exposure to emerging markets, as a core holding. For those willing to take slightly more risk, direct investments in emerging markets are expected to perform well. Following the Copenhagen Climate Change Summit and with oil prices likely to increase, they believe alternative energy will be a big area to consider. CS will also focus on cyclical stocks, such as IT and some consumer discretionary stocks, as well as selected small- and medium-cap stocks together with Value stocks.
UBS forecasts that earnings stability will lend support to equity prices, with economic activity and business sentiment showing recovery. Continued improvement of corporate profits is expected for the early part of 2010. The bank prefers Eurozone and emerging market equities, and has a positive outlook on the Energy, Materials and Information Technology sectors. It also believes that removal of policy support is a risk to equities and will dictate the preference for cyclical or defensive tilts during the year.
Credit Suisse believes that anyone considering the fixed-income sector should avoid focussing on best-quality (triple A) credits or on longer durations; choosing lower levels--such as single A's, double B's and triple B's--keeping maturity short- and medium-dated.
They expect reasonable rather than big returns in this sector.
UBS sees potential risk in government bonds and favours corporate bonds. They suggest that cautious investors should shift some of their government bond exposure to investment grade corporate bonds with medium-term durations. Investors with greater risk-tolerance should consider high-yield corporate bonds.
Credit Suisse is certainly positive on industrial metals, such as copper; as well as on oil and platinum--predicting reasonable returns on all of them in 2010. Gold prices are quite likely to go significantly further; however, CS sees this as rather a difficult market for investors, with potential for prices to rise to...