MarketWatch’s Jonathon Burton offers 10 investment ideas for the new year. According to him, bonds are going to be big in 2009.

  1. Buy long-term Treasury bonds. According to Merrill Lynch economist David Rosenberg, there’s opportunity for longer-dated Treasury bonds this year. “In a deflationary backdrop, there are only three investment characteristics that make sense: income and income growth, safety, and duration,” he said.
  2. Add investment-grade U.S. corporate bonds. “The market is pricing A-rated or higher debt as if the underlying companies are on the brink of bankruptcy, pushing risk premiums skyward,” MarketWatch writes, but that’ll change when investors get braver, taking more risk and pushing yields down.
  3. Favor U.S. stocks over international. We’re not the only country struggling through a recession, but the United States has put up a more aggressive fight, MarketWatch writes. According to Larry Adam, U.S. chief investment strategist at Deutsche Bank, U.S. stocks are poised to rebound in the second half of the year as corporate earnings stabilize and investors start to focus beyond the recession.
  4. Stay defensive with consumer staples stocks. Consumers are holding on to their dollars, so invest in companies that produce what people need, rather than what they want.
  5. Stick with health-care stocks. “Health care is one of the few sectors that has exhibited solid earnings growth, an accommodative macro environment and an attractive valuation backdrop,” MarketWatch quotes Brian Belski, Merrill Lynch’s chief U.S. sector strategist.
  6. Connect with utilities and telecom stocks. These businesses have pricing power at a time when many companies don’t, MarketWatch writes, and can bring predictable dividend payouts.
  7. Embrace companies with rising dividends. Look for cash-rich companies with a steady increase in annual payouts, regardless of good or bad markets.
  8. Count on businesses in strong financial shape. This may seem like a no-brainer, but according to MarketWatch, “companies with solid finances and a leading share of their industries are on sale. “
  9. Be selective with municipal bonds. “The municipal-bond market has seen unprecedented downgrades and represents significantly more risk than in the past. Municipal bonds are no longer the safe harbor they used to be,” MarketWatch quotes Warren Pierson, co-manager of Baird Intermediate Municipal Bond Fund. Until investors start taking on more risk, pick and choose your bonds. Pre-refunded bonds are essentially secured by Treasurys and better insulated from volatility, MarketWatch writes.
  10. TIPS. We’re sinking under deflation rather than inflation, but MarketWatch reminds us inflation expectations can take you by surprise. The site quotes Larry Kantor, head of research at Barclays Capital: “If policymakers are successful, inflation could become the predominant threat once the global economy starts to recover.”