What will 2010 hold for investors?

Looking ahead

During tough financial times it's hard to know what lies ahead - to help you along, Moneywise presents a round up of expert comment on where (and where not) to put your money in 2010. 

James Fairweather, chief investment officer at Martin Currie, says current attention directed towards is "well deserved" - but adds it shouldn't overshadow the opportunities on offer in Brazil and India.

"At present, the consensus seems to be that emerging markets will outperform again in 2010 in both economic and stockmarket terms," he says. "There is a consensus that developed markets will, in comparison, be rather dull, particularly as fiscal stimulus and monetary support are withdrawn."

In terms of the UK, the economic outlook looks increasingly bleak, says Richard Buxton, head of UK equities at Schroders. "We are therefore facing very limited levels of growth, with global interest rate rises posing the biggest challenge."

However, Buxton believes that UK equities offer more than pure UK-based profit streams. While
stockmarket volatility is bound to increase over the next six to nine months, he adds that valuations on UK equities are "completely supportive and in no way stretched".

"This should limit the downside during periods of volatility," he concludes. 

David Jane, head of multi asset at M&G, agrees that UK equities are looking positive, considering their status as a real asset offering attractive long-term returns as well as the very international nature of the UK stockmarket.

"Most FTSE 100 companies are large global blue-chips which generate significant revenue outside the UK and are not dependent on the UK consumer, nor are they overly exposed to the pound’s value falling," he explains.

However, Jane does add that both sterling and US dollar-based assets are likely to suffer next year - due to the risk of further quantitative easing, the indebted state of public finances and the poor economic outlook.

Tom McPhail, head of pensions research at Hargreaves Lansdown, doesn't expect investment markets to "settle down" next year. 

"Predicting the next source of volatility is by definition unreliable but contenders could include a sterling or dollar crisis, natural disasters, central Asian political instability, international debt default, final salary scheme defaults, a hung parliament in the UK, an energy crisis, or all of the above, consecutively or concurrently," he adds.

2010 will see the introduction of a new 'super' rate of income tax and the removal of personal allowances from higher earners. The changes will make tax wrapper selection for investments even more important in financial planning, according to Dan Clayden, director of Clayden Associates.

He explains: "The introduction of higher rates of tax will widen the effect on returns seen between the most and least tax-efficient wrappers."

Gavin Oldham, chief executive officer at The Share Centre, says: "2010 will be the year when the UK parts company with other developed countries. The markets which will feel it most will be the fixed-interest bond markets, and particularly government stocks.

"The likelihood is that the stockmarket will be subjected to a ‘tug-of-war’ contest between the bearish domestic outlook and the bullish international one. Global GDP growth is forecast to be in the region of 4% - so while the larger companies in the FTSE 100 may be cheered by this opportunity, smaller domestic stocks could be less fortunate."