Commodities will be the main focus of investors' strategies next year, driven by demand from developed economies, according to Fidelity asset allocation director Trevor Greetham.
In his outlook for 2010, Greetham says although commodity analysts are "fixated by China", developed countries will show unexpectedly strong growth.
"Industrial restocking from these sleeping giants should boost commodity prices very significantly," he says.
Greetham also thinks fears of inflation and cheap dollar funding will further increase investor interest in commodities.
He says "equity-friendly conditions" have returned for the first time since 2007 and emerging markets in Asia are best-placed to capitalise on this situation.
Where commodities and equities will be next year's winners, Greetham expects fixed income to come under significant pressure. Although he thinks corporate bond spreads will remain attractive - albeit less so than at the start of the year - his chief concern centres on government bonds.
"Yields are already very low and they are likely to rise as central banks move progressively towards removing their ultra-loose policy stance."
Greetham says the financial panic has passed and global growth indicators are strong: "Policy remains extremely accommodating and inflation is unlikely to become a serious problem in view of the massive spare capacity in the world economy."
He cautions, however, that should an inflation scare caused by high oil prices coincide with a slowdown in the recovery then a return to strong growth could be delayed.
If the global economy rebounds as strongly as Greetham expects, then interest rates will also pick up, he says. However, he sees a divergence between the ECB and its concern with the headline rate of inflation and the Federal Reserve's focus on core rates.
"Historical differences mean European institutions are usually more anxious about rising prices while America lives under the cloud of deflation," he says.
Finally, Greetham underlines the importance of politics in shaping the UK's economic landscape.
"The biggest risk for sterling is a hung parliament following the General Election. Coalition government would make it extremely hard for any party to press for fiscal restraint for fear of losing out in the re-run vote that would surely follow."
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