2011 was a dismal year for investors. Just about every global stock market fell, often sharply. The euro zone was the main culprit, but the Japanese tsunami, Arab Spring, oil price spikes and the failure of the US to tackle its debt mountain also played a part. So will next year be any better? Harvey Jones asked a range of experts to give us their investment insights for the coming year.
2011 was a volatile year for currencies and we can expect more of the same in 2012, says Chris Towner, the director of FX advisory services at HIFX, a currency transfer service.
The fate of the US dollar rests on what happens to the global economy. The worse things get, the better for the dollar. "When everything goes pear-shaped, the US dollar strengthens because it is seen as a safe haven. If the crisis deepens, we can expect a stronger dollar. If things stabilise, the dollar will fall."
Mr Towner believes the euro will survive - just. "The decision ultimately rests with the Germans. The systemic risks of letting the euro die are greater than the costs of keeping it alive."
Sterling is undervalued and could stage a recovery. "The UK coalition government's tough austerity measures are the only way forward. If the global economy recovers, sterling is well placed to take advantage."
The Canadian, Australian and New Zealand dollars could all struggle in 2012. "The so-called 'commodity currencies' are overvalued and too heavily dependent on demand from China. They could prove the upset of 2012."
Hottest currency: Turkish lira. Turkey has a young population, strong growth, a stable banking sector and a good balance between agriculture, industry and services. Its currency has steadily weakened over the past four years, but could be ripe for a rebound.
Global property markets
The worldwide property market has split into two since the credit crunch, says Kate Everett-Allen, the head of international residential research at Knight Frank, the global property specialists. "Mainstream housing markets have been very weak thanks to stuttering economies. Yet the world's affluent have weathered the storm and taken advantage of ultra-low interest rates to invest in property."
London, Paris, Geneva and Singapore are proven safe havens for those looking to escape currency woes in the southern euro zone and political strife in the Middle East.
The luxury property market will also split in 2012. "We expect price falls in Geneva and Madrid, but strong growth in Moscow and Paris. Hong Kong could fall up to 10 per cent, yet Beijing should rise 10 per cet. Limited supply should continue to push up prices in London," Ms Everett-Allen says.
Hottest property market: Moscow, thanks to rising demand from wealthy investors and a shortage of supply.
Emerging markets are the sole ray of light in the global economy right now, says James Thomas, the regional director at Acuma Wealth Management in Dubai. "They account for more than 40 per cent of the world's population and their earning power is rapidly increasing. They are also making the crucial transformation from being export-led economies to generating more growth on their domestic markets."
Share prices in China, Brazil and Russia have fallen more than 20 per cent over the past 12 months, while India has fallen 35 per cent. This means they could be due for a rebound. "Emerging markets still offer good growth potential and should be part of your investment portfolio," Mr Thomas says.
Hottest BRIC: Brazil is a fast-growing economy with expanding oil wealth and should continue to enjoy rapid GDP growth.
Global blue chips
With markets set to remain volatile, investors should focus on large, solid, blue-chip stocks, says Dominic Rossi, the global chief investment officer for equities at Fidelity Worldwide Investment. "Good-quality companies with high dividend yields should combine attractive total returns with a measure of downside protection."
Look for defensive, global companies with reliable earnings streams and high, sustainable dividends. "The income offers a measure of protection against further volatility and gives you a better return than cash," he says
Hottest blue-chip stock: Unilever is a large, robust, UK-listed blue chip selling food and household goods across developed and emerging markets.
The US was the top performing stock market of 2011. It ended the year a few points down, but almost every other global market suffered sharp falls.
The US could repeat the trick in 2012, says Dan Dowding, the chief executive at IFAs Killik & Co in Dubai. "It's an election year in the US and, historically, this has always been good for domestic and global equity markets. No president wants to go into an election with stock markets and public confidence falling."
US economic data is on the mend. "Payroll numbers and job vacancies are improving and GDP growth hit 2.5 per cent on an annualised basis in the third quarter. Given this positive economic data, we view US stocks favourably," Mr Dowding says.
Hottest US fund: SPDR S&P US Dividend Aristocrats ETF is a recently launched, low-cost tracker fund that invests in company "aristocrats" that have raised their dividend for 25 consecutive years.
Despite the slowdown, the world is hungry for energy. The oil price is unlikely to fall in 2012, says Dan Dowding at Killik & Co. "With Saudi Arabia needing at least US$95 [Dh348] a barrel to break even, and continuing uncertainty over Iran, we remain positive on the oil price. We expect a barrel of Brent crude to average $120 across 2012."
To play the energy price, Mr Dowding recommends three large global oil giants. "Royal Dutch Shell is a good defensive stock with an attractive 5 per cent yield. BP is still recovering from the Deepwater Horizon disaster and its share price could be re-rated. If you're investing in dollars, you may prefer Exxon."
If you prefer mutual funds, Mr Dowding tips Guinness Global Energy and the higher-risk New City Energy, which invests in small and mid-cap companies.
Hottest oil stock: Tullow Oil, an oil and gas exploration and production company, may be riskier than the oil majors, but it offers greater scope for share-price growth.
One for the brave
While many investors are fleeing to safety, a brave few are embracing risk. Dan Dowding at Killik & Co has a stock tip for bolder investors: Titan Europe, listed on London's alternative investment market (AIM).
"Titan Europe, launched in 1995, manufactures wheels and vehicle undercarriages for construction, agricultural and mining markets across six continents. Recent results have beaten expectations and it has won new business, including a global supply contract for wheels for Volvo Construction."
The company anticipates a stable 2012 with modest underlying growth and significant sales in China and Brazil.
The stock can be volatile. Titan Europe's shares crashed from a high of £2.55 (Dh14.69 at today's rate) in 2007 to just 7 pence at the end of 2008. At the time of writing, it was trading at about 98p. "It clawed its way back into profit in 2010, for the first time in 18 months. That's when we took notice, encouraged by successive trading statements which show that all of the group's end markets were improving."
But be warned. Titan Europe's shares could be vulnerable if we have a double-dip recession, Mr Dowding says.
Hottest number: trading at under five times earnings for 2012, Titan Europe looks cheap and could outperform over the next 12 months, the global financial crisis notwithstanding.
There's no escaping it, but 2012 looks set to be another tough year. We can expect "a slowdown in economic activity in all major economies", according to the latest outlook report from the Organisation for Economic Cooperation and Development (OECD). Brazil, India, the UK, France, Germany, Italy and the rest of the euro zone should all see their economic activity falling below the long-term trend. Canada, China and the US may also trail, although less dramatically.
Hottest economies: Russia and Japan are the only major countries where economic activity is above the long-term trend. The best of a bad bunch.
Feeling like you want to go against the grain? Then why not consider investing in Europe? True, the continent has one or two issues right now, including an embarrassing currency problem, but at least you can pick up shares on the cheap. A decade ago, European stocks were trading at an expensive price-to-earnings ratio of 24 (about 15 is thought to represent fair value). Today, it is trading at just nine times earnings, says Darius McDermott, the managing director at the UK-based IFAs Chelsea Financial Services. "This is really one for the contrarian investors. But if you think European leaders can turn things round in 2012, it might be worth a punt."
Don't rush into it. The euro zone crisis is likely to get a lot messier before it is finally resolved. But at some point, there may be a great investment opportunity.
Hottest fund: BlackRock Global Funds European Equity Income invests in a diversified portfolio of major UK and European blue-chip stocks.
Chinese demand for raw materials, from copper to corn, fuelled a massive boom in commodity prices, but prices fell in 2011. Platinum, lead, aluminium, copper, tin and nickel and "soft commodities", such as cotton and cocoa, all plunged.
In the long term, increasingly scarce raw materials, growing demand for food and pressure on water supplies should help commodity prices rebound, says Jeremy Batstone-Carr, the head of private client research at stockbrokers Charles Stanley. But in the short term, the picture is highly uncertain. The problems afflicting the global economy will also hit commodities. If you invest in this sector, you have to brace yourself for a bumpy ride.
Hottest commodity: gold. You can invest in gold through mutual funds and exchange-traded funds, but Mr Batstone-Carr recommends buying actual gold itself, such as bars and coins. There are no fund manager charges, you will get the market price when you sell and there is no counterparty risk. But you do have the cost and worry of safe storage.
Next big thing
Bored of the BRICs? Then head for the wild frontier. The "next 11" countries - Mexico, Nigeria, Egypt, Turkey, Iran, Pakistan, Bangladesh, Indonesia, Korea, Vietnam and the Philippines - could soon assume their mantle, says Steve Gregory, the managing partner at Holborn Assets in Dubai.
"Frontier markets boast low levels of debt, especially compared to the West, and growing personal disposable income. They also have youthful populations and rapid GDP growth." Political risk remains a problem, as seen in the Arab Spring, which destroyed US$50 billion (Dh283.6bn) of Egypt's GDP.
"Frontier markets are still volatile, so make sure you understand the risks, but the rewards could be great if you invest for the long term," Mr Gregory says.
Hottest fund: Castlestone Next 11 Emerging Markets Fund offers broad exposure to frontier markets and spreads your risk by investing across a wide range of countries.
So which investments should you shun in 2012? Almost every investment is likely to be volatile in 2012, but some are riskier than others.
If you hold any European funds or stocks, you will be exposed to the single-currency crisis because they are priced in euros, says Steve Gregory at Holborn Assets. "Given the uncertainty about the future of the euro, you haven't just got investment risk, but currency risk as well. If the euro plunges, so could the value of your holdings."
Bonds have surprised everybody by outperforming stocks and shares over the past decade, but their good run may not continue for long. "When interest rates plunged three years ago, demand for bonds soared, because they pay a fixed rate of interest. But if inflation takes off and governments are forced to hike interest rates, their value will plummet. So don't pile into bonds either."
Mr Gregory has another concern. "If Germany cannot raise finance easily and cheaply, what chance do other countries or regions have, such as the Middle East? If it struggles to raise money next year, listed companies in the region could struggle. Now may be a good reason to stay away from stocks in the Gulf Co-operation Council region."
Hottest tip: play it very, very cool in 2012.