Ten investment trends for 2010

What are the biggest trends for next year? USA Today counts some of the top trends to look for – and to look out for – as you and your clients head into 2010.

1. Global growth. While the recession is slowly unclenching here, foreign markets are taking advantage of a weak U.S. dollar. Emerging economies, infrastructure spending and commodity demand will be leading trends next year, the paper suggests.
2. Bigger is better. A continuation of the first trend, big multinational companies that do a lot of business abroad stand to gain from a robust global economy. David Bianco of Bank of America Merrill Lynch told USA Today, “Companies with foreign exposure have more business exposure vs. consumer exposure, and they will benefit more from higher commodity prices.”
3. Be wary of emerging markets. Despite a lot of long-term potential from these markets, however, the paper warns us that a short-term might hinder immediate growth. David Tice of Federated Investors suggests emerging markets are currently at a resting point.
4. Beware of bonds. If the global economy continues to grow, the feds may start raising interest rates, cutting bond prices and eliminating their perceived safety.
5. Bond substitutes. As investors turn away from bonds, they could replace them with dividend-paying stocks. U.S. beverage and household product makers with healthy dividends – and, again, foreign exposure – are big stocks to watch, as well as equity income funds, according to the paper.
6. Revenue trumps profit. Looking at profits alone isn’t enough; investors must also look at a company’s revenue to judge its strength, as higher profits could be a sign of effective cost-cutting and job reduction rather than real growth.
7. Health care reform. It’s a loaded phrase these days, but for better or worse, the health care sector will be a big one to watch in 2010.
8. Zeal for deals. A stockpile of corporate cash and a search for growth will drive the merger-and-acquisition market, the paper writes.
9. Go for green. Not cash – the climate summit in Copenhagen highlights one of next year’s big trends. Alternative energy and energy efficiency are predicted to be big movers next year, Abby Joseph Cohen of Goldman Sachs told the paper.
10. Preserve principal. With the recession in too-recent memory, it shouldn’t be too difficult to warn clients away from reaching for improbable yields. Federated Investors’ Tice told the paper he thinks the market could fall another 40 percent.