An uneven and modestly-paced global rebound in 2010 means investors will have to dig deep to find growth opportunities in sectors and markets overlooked in the past, finds a new investment strategy report from CIBC released Friday.

“The world’s economy is again in drive, but operating only on half its cylinders,” said one of the report’s contributors, Avery Shenfeld, chief economist at CIBC.

This environment makes it challenging to find growth opportunities but Shenfeld says the signs are pointing investors to “countries and sectors with less of a lingering hangover from the financial shock” which are generally positioned for better returns on equities and better spread performance on corporate bonds.

Countries such as Brazil and emerging markets not at the epicentre of the sub-prime mortgage and structured credit crisis are “positioned for a decent rebound, along with emerging Asia, where banks avoided the deep losses experienced in Europe and the U.S.” says Shenfeld.

This is holding true whether one looks at equities, fixed income or currencies for “emerging markets and markets that have high exposure to them,” notes Michael Rosborough, executive director, strategic risk. The road to recovery he says has been led by credit and interest rates, then emerging equities, and finally G7 equities.

Rosborough also notes that G7 equities, and particularly those of the United States and United Kingdom that had been hit the hardest during the credit crunch, may take a long while to fully recover, but the troughs are so deep that the rebound potential is ultimately the greatest.

This month’s report highlights a currency opportunity in Brazil. “Brazil has been hot, and it is getting hotter,” the report states. “Brazil declared an end to the recession after only six months, all of its sovereign debt ratings are now firmly investment grade after the latest upgrade from Moody’s, and it enjoys capital flows into the economy. We believe that the appreciation of the Real still has room to continue, and expressed this belief through a structured trade.”

The report also gives three reason to underweight gold. “1) Weak dollar drove the recent rise of gold, and we believe that the dollar has overshot to the downside, with a relief rally expected in the next two to three quarters, 2) Investor anxieties continue to subside, crimping appetite for financial insurance, including gold, and 3) We see an unwinding of the present exaggerated market fears about near-term inflation.”

IE