This thread discusses the most appropriate asset allocation for today’s market. Over time it is hoped that ongoing debate will guide “Stockopedes” to continuously re-position their portfolios into the most advantageous current sectors.

If we can select the up-and-coming sectors and, as importantly, avoid the losers our portfolios have a good chance of outperforming. No one disputes the importance of “stock picking” but it’s difficult compared to choosing appropriate sectors; it can be avoided entirely by the selection of appropriate ETFs.

To kick of the discussion here some thoughts.

I consider there is a high risk of the market revisiting its lows and indeed going lower in the next 18 months. The normal place to hide in this circumstance would be bonds but with massive projected, worldwide debt issuance (the US alone is forecast to borrow $1,840bn this year and $10,000bn in the next decade Congressional Budget Office), there is a clear risk of rising interest rates.

In developed economies both unemployment and the savings ratio are rising, which spells gloom for consumer spending, property and the major exporting nations. If China suffers then miners and metals will suffer alongside.

Global oil demand has shrunk, only a little, so existing well depletion and reduced capital expenditure mean that oil and oil stocks will do well in the next three years. (US natural gas is very cheap relative to oil and coal and should be on every ones watch).

Agriculture and food could do well given the low world stocks of most feed grains.

Currencies are a parade of ugly sisters; Obama’s spending may well do for the US $, as Gordon Brown’s has already done for the £ and Eastern European debt may do for the Euro, which leaves Gold as an obvious safe haven.

I look forward to hearing counter views and what about other sectors: Banks, Healthcare, Defense, Utilities, etc?

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