Looking ahead to 2007 for investment strategies can seem somewhat daunting. But now is the time to plan out your investment portfolio moves for the next 12 months or so. MarketWatch offers 10 investment strategy ideas for the New Year. Some of them include adding media stocks to your investment portfolio, as well as technology and military stocks. Also, Japanese consumer stocks are considered undervalued, but have potential for growth. The, key, though, according to the article which focuses on investment strategies offered by Merrill, is as follows:
The 10 themes that Richard Bernstein, Merrill’s chief investment strategist, and colleague Kari Pinkernell outlined in a report to clients this week all share a common goal: Finding industries and companies at attractive valuations that can grow earnings against the backdrop of a coming worldwide economic slowdown.
“Although it is getting harder to find growth themes that have not already been exploited because of the continued abundance of liquidity and leverage, we do offer several growth themes that we feel have an unrecognized twist,” the report notes.
The Merrill strategists foresee an anemic economy impacting energy and commodity prices and big-ticket consumer spending, creating a “Darwinistic” market where “survival of the fittest determines stock market performance.” In this case, “fittest” applies to large companies in developed markets with strong financial health and a global footprint.
The main obstacle to growth is that short-term interest rates are higher than long-term rates, the Merrill report explains. Typically, this topsy-turvy situation, known as an inverted yield curve, has resulted in weaker corporate profits.
“Every yield curve inversion since 1966 has been followed by a profits recession,” the Merrill report says.
In the hunt for earnings growth next year, the Merrill strategists suggest that investors consider the following: large-cap stocks over small-caps, and developed markets over emerging markets; technology, media and defense stocks; triple-A rated corporate bonds; non-U.S. stocks that pay dividends; and Japanese consumer stocks.
Conversely, the strategists recommend that investors reduce portfolio exposure to these areas: retailers, with the exception of discount retailers; financial stocks, except for multiline insurers; and commodity and energy stocks.
So there you have it. Some investing ideas for the year ahead. But, as always, it is important to remember that market predictions have a way of going awry, and that any investment carries with it the risk of losing money.