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Last year was an annus horribilis for most stockmarket investors - but what's in store for 2009? As the credit crunch and ensuing recession take their toll, many UK companies' shares have plummeted - taking the value of people's savings with them. The global economic meltdown forced stockmarkets down worldwide, with the FTSE 100 index experiencing the worst year ever.
Yet, at the same time, savings accounts are looking less and less appealing after the Bank of England repeatedly slashed interest rates. With predictions of further reductions to come - we could well see another chunky cut on Thursday - some may decide this is the year to dip their toes in stockmarket waters.
But with a recession expected to continue for at least another 12 months, where in the world, and in which sectors, should you be investing in 2009? To help you decide, we have put together a guide to five possible investment hotspots for the coming year.
Asia
One of the major effects of the UK downturn has been the weakness of the pound against other global currencies such as the dollar, euro and Japanese yen. Most experts believe sterling will remain relatively weak in 2009, which is one reason so many professional investors are backing large companies that earn in dollars.
Another way investors could profit from the weakness of the pound is by investing in Asia, where the Japanese, Malaysian and Chinese currencies look particularly strong. The outlook for Asian stockmarkets is also relatively rosy. The Far East, excluding Japan, was the second most tipped region for 2009 after the US, according to fund managers surveyed by the Association of Investment Companies.
But some industry insiders consider Japan a hot spot, too. "For Japan, recession is 'business as usual'. The market has been falling for the past three and a half years and is consequently much cheaper than other developed markets on many pricing measures," says Ben Willis, head of research at financial adviser Whitechurch Securities.
The US
One thing on which most professionals are agreed is that the US stockmarket is likely to stage a recovery this year.
The main reason is that the country's economy is believed to be well ahead of the UK and Europe on the road to escaping the global economic downturn. According to Schroders chief economist Keith Wade, this is, at least partly, due to the determination of the Federal Reserve to improve the monetary environment by aggressively cutting interest rates and introducing various measures to improve liquidity.US companies are expected to bounce back more quickly as a result, with investment manager PSigma predicting a 20% or more jump for the Standard & Poor's 500 index.
James Abate, manager of the PSigma American Growth fund, says: "The relative position of the US economy appears to be several quarters ahead of the UK and Europe, allowing the US stockmarket to be a 'relative leader' among the developed markets. Our expectations for 2009 are therefore very bullish."
Whitechurch Securities also believes the outlook for the US market is positive. Ben Willis says US companies remain global leaders in many sectors, and continued growth in emerging markets will support the exporting side of the economy. "There is little dispute that US equities are extraordinarily attractive by historical standards."
Blue chip companies
Predictions for the FTSE 100 index as a whole over the next 12 months seem to be all over the shop. Many investment firms expect the market to end the year above its current position, but others are taking a more cautious approach and believe the index is in for another testing year.
Morgan Stanley, for example, thinks it will end 2009 at around 4300, which is about where it was earlier this week, while JP Morgan is aiming for 5100.
Even the stockmarket "bears" see some opportunities, however. Morgan Stanley expects the market to reward large-cap companies with strong balance sheets and a combination of reliable growth prospects and/or high and secure dividend yields. Its stock recommendations include BP, Cadbury, Carnival, Autonomy and Vodafone.
Elsewhere, stockbroker Killik & Co is also backing blue chips, tipping pharmaceutical giant AstraZeneca, utilities company Capita and Imperial Tobacco, among others.
Commodities
Almost half of the global asset allocators working for UK fund managers think oil is now undervalued after having its price slashed by more than 60% in three months, according to a Merrill Lynch survey. However, its figures also show that investors in Europe have continued moving out of the so-called "basic resources", and "oil and gas" sectors in recent months.
One reason investors have been ditching mining shares is that they are concerned about the slowdown of major importers such as China.
Mark Harris, head of funds at New Star, says: "Many have retreated from mining stocks due to concerns about a slowdown in emerging markets' growth and the potential effects of inflation on consumer spending. Any slowdown would be from a high base, and many emerging market economies, including China, continue to enjoy healthy growth on a relative basis."
Harris believes gold stocks will gain ground over the next few months as a result. Meanwhile, Barclays Wealth expects to see some upward movement in agricultural commodities in the early part of this year, and others are also tipping commodities longer-term.
Jeremy Beckwith, Kleinwort Benson's chief investment officer, says: "Commodities should become attractive later in the year as emerging economies recover."
Technology stocks
Ever since the dot com bubble burst a decade ago, investors have been notoriously cautious when it comes to technology stocks.
However, it is one of the most hotly tipped sectors for 2009, partly due to expected merger and acquisition activity. Fidelity's Sanjeev Shah says he is "overweight" in technology companies. "I am always attracted to potential bid targets and it is likely that merger and acquisition activity will pick up in 2009."
Another reason some investment professionals are bullish about technology at the moment is that they expect it to benefit because businesses will be keen to economise on labour.
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