If there is one feature that marks this year’s forecast for global markets, it’s lack of consensus. Although some global money managers say now is the time to start acquiring equities, others are taking a wait-and-see approach. Nor do they agree on which countries or sectors to pursue.

So, when you are presenting investment options to clients, it is more important than ever to be sure both you and your clients are on the same page when it comes to each client’s goals and risk tolerance.

Many bullish money managers admit that stocks are likely to be volatile in 2009 and may decline by another 10% in value before establishing an upward trend. Generally, these money managers don’t think your clients will lose by investing now, as long as they have a three- to four-year time horizons and stick to high-quality stocks.

Among those money managers advising continued caution, there is concern that the market will decline even beyond 10%. These managers aren’t necessarily the most negative about the economic outlook, but they do believe that stocks may go down more before they rebound. Nor are they expecting a sharp recovery. “Why jump in front of the train when there can still be a lot of downside?” says Lloyd Atkinson, an independent financial and economic consultant in Toronto. “You won’t miss a big run-up, and can still get on when the train starts moving.”

A veteran of many business cycles, Atkin-son recommends waiting until volatility has settled down and short-sellers run out of steam.

John Arnold, chief investment officer and managing director with AGF International Investors Co. Ltd. in Dublin, also has his brakes on. He recommends waiting until companies cut their dividends, as that will reduce their share prices further. While he believes insurance companies will hold dividends steady, he expects many banks to cut their dividends, as will other firms that are finding it hard to borrow money.

Clancy Ethans, chief investment officer with Richardson Partners Financial Ltd. in Winnipeg, suggests clients rebalance their portfolios to long-term asset-mix targets. Although that implies some increase in equities, RPFL is not recommending clients move aggressively into stocks until there are further signs that a recovery is imminent. The firm’s analysts are still nervous about the possibility of more writeoffs or hidden surprises in banks’ earnings. Ethans suggests waiting for smaller spreads between corporate bond and federal bond rates and less volatility in credit markets: “We have to see people taking more risk.”

Ethans and Andy MacLean, RPFL’s director of private client investing in Toronto, both want to see corporate bond rates that are 250 to 350 basis points more than federal bond rates, compared with the current 600-plus bps; and to see the London interbank offered rate at 100 bps more than 91-day Treasuries. Ethans and MacLean believe both will happen fairly soon; when they do, the RPFL money managers plan to move to positions that are neutral or overweighted in banks. “We’d rather give up early moves in the banks,” Ethans says.

A somewhat different approach comes from Fred Sturm, chief investment officer with Toronto-based Mackenzie Financial Corp. He expects “fits and starts” in both the economy and the stock markets, and suggests clients cover their backsides while cautiously positioning themselves for a recovery. That is, clients should have cash available to see themselves through, until there’s evidence the recovery is underway. But they should also invest in stocks that will do well in a recovery, including resources and emerging markets.

Other money managers suggest that the bulls will be back in short order and that now is the time to move into equities. Ross Healy, president of Toronto-based Strategic Analysis Corp. , believes stock markets have not yet priced in the full extent of the global recession. Yet he is advising his clients, who are currently 70%-90% in cash, to put some of that cash into equities now because there are many “super bargains.”

The banks have been so beaten up, Healy says, that it’s time to start accumulating them. He would stick to Canadian banks, which are the strongest in the world. He also thinks oil and mining stocks are becoming increasingly attractive from a long-term investment perspective. There’s nothing wrong with utilities, either, he says, particularly BCE Inc. Its stock price plunged late last year following the failure of the proposed deal to take it private.

@page_break@Nandu Narayanan, chief investment officer at Trident Investment Management LLC in New York and manager of several funds offered by Toronto-based CI Investments Inc. , counts himself among the bears, doubting that healthy global economic growth will return before 2010 or even 2011. But, he says, “Now is as good a time as any to get back into equities.” His caveat: your clients must be prepared to hold those equities for at least four years and avoid the U.S., or at least companies dependent on the U.S. economy.

Bill Sterling, chief investment officer at Trilogy Global Advisors LLC in New York, which also manages a number of CI funds, is much more optimistic about the global outlook, assuming governments make the right fiscal and monetary policy moves. He wouldn’t be surprised by a 30%-50% recovery in stock markets this year.

Sterling looks for stocks that will benefit from both an upturn in economic activity and the consolidation that will probably occur in many sectors over the next few years, including consumer and technology companies. He is not yet looking to the energy and materials sectors, although improvement in those sectors may come soon.

Jean-Guy Desjardins, president of Montreal-based Fiera YMG Capital Inc. , also expects a strong recovery in both the global economy and equities. He suggests clients put half their cash into equities now; once the market confirms that a rally is underway by moving up by 10%-15%, clients should put the rest into stocks.

As well as equities, many money managers are recommending investment-grade corporate bonds. They note, however, that the window of opportunity here is small — only a few months — during which investors will continue to sell bonds while starting to buy the equities of the same companies.

The strategy most of these money managers expect to pursue is to sell these bonds later in the year. But they also say that clients can choose to hold them to maturity for the good returns they provide. (See “A guide to bond shopping…” on page B18.)

In your discussions with clients about when and how much to invest in equities, you will want to cover the following points:

> Finding The Money. It’s all very well to say, “Buy more equities.” But where are your clients going to find the money? Many retail investors don’t have much cash and will need to sell some stocks or mutual funds in order to buy into the sectors or funds that are expected to do well in the next few years. That could be a hard sell, as it will probably mean taking losses on the securities being sold.

Charles Burbeck, an independent global portfolio manager based in London, suggests selling shares in companies with heavy debt or near-term financing requirements that they may not be able to secure.

Sterling recommends selling shares in companies in sectors that haven’t gone down that much, such as health care.

> Patience. No one knows exactly when and at what level stock markets will bottom out. Thus, clients have to be prepared for declines of 10%, 20% or even more before the equities they buy now start rising. And even when they move up, the increases may be slow and gradual. As Healy puts it, clients have to discipline themselves not to look at their investment statements every month.

Burbeck recommends investing with a three- to five-year time horizon and not worrying about losing as much as 10% in the short term.

> Dollar-Cost Averaging. Some money managers advise this as a way to increase equities holdings without jumping in with both feet. “The market hasn’t hit bottom yet,” says Burbeck, and there’s no reason to be aggressive.” He suggests buying equities over a 12- to 18- month period: “The mistake people might make is getting back in too soon.”

Peter O’Reilly, global money manager for I.G. Investment Management Ltd. in Dublin, also suggests dollar-cost averaging.

Other money managers think dollar-cost averaging is a mug’s game. Clients should buy when the stock of quality companies with solid, long-term growth potential are inexpensive, says Narayanan, and not worry about whether the stock will get even cheaper.

> Geographical And Sector Diversification. Assessing which regions should be included in a portfolio is not an easy decision, given that some global money managers believe U.S. equities will move up first, while other money managers advise staying away from any company that is dependent on the U.S. Similarly, some favour resources equities, while others won’t go near the sector.

Most money managers recommend investing in sectors that are likely to be leaders when equities move up, such as banks and consumer discretionary. But some suggest staying with the defensive sectors until there are clear signs that the recovery will soon be underway. Ethans and MacLean both argue that life insurers, utilities and telecommunications stocks currently have yields of 4%-5%, so clients can get paid while they wait for the right time to move into growth sectors.

A look at the major regions and sectors:

> The U.S. This is where the global slowdown/recession began, and many believe that this is where the recovery will start. But there are also a minority who believe the U.S. will be among the last to recover because of the years it will take overleveraged American consumers, financial institutions and the federal government to get their finances back in order.

Both Healy and Narayanan believe the U.S. must let the credit crunch run its course and reduce the heavy debt that is dragging down its economy sufficiently to allow for solid growth. Both money managers are against recapitalizing U.S. banks or saving other companies, saying that bankruptcies — while harsh in their effects — are necessary.

As a result, neither has any enthusiasm for U.S. equities or stocks of companies dependent on U.S. domestic demand. However, Narayanan notes, there are some globally branded U.S. companies, such as Johnson & Johnson Inc., Exxon Mobil Corp., Walt Disney Co., PepsiCo Inc. and Boeing Co. , that could be good buys.

Arnold is another money manager who is worried about the U.S. In his view, the key issue is rebuilding consumer and business confidence. Americans are used to a 5% unemployment rate, and he thinks it could reach 10% in 2010. “Corporate management have totally lost confidence,” he says, “and are going to batten down the hatches as they dig in for a long, hard struggle. They will de-stock and de-man.”

Other money managers, however, think the U.S. will lead the recovery. Atkinson, for example, believes the huge fiscal stimulus package of US$800 billion-US$1 trillion over two years will do the trick — as long as it is aimed at job creation, which will provide support for household incomes. He firmly adheres to the thesis that the U.S. will be the first to recover, and he recommends overweighting U.S. stocks: “At the end of the day, the U.S. is still the most flexible and most dynamic part of the world.”

Fiera’s Desjardins also expects the U.S. to lead the recovery.

> Europe. There isn’t much enthusiasm for this region, with Arnold the only money manager overweighting it. He’s likes the theme in Europe of financial supermarkets, which offer one-stop shopping that is much more comprehensive than anything offered on this side of the Atlantic. In his view: “Retail banks that depend on collecting deposits should remain in a strong position.”

Other money managers feel that Europe, while improving, is still too structurally inflexible — particularly in labour markets — to recover quickly. “Because of government policies and tax rates,” says MacLean, “when Europe slows, it takes longer to turn around.”

Sterling agrees, noting that the rules implemented when the euro was introduced make it difficult to provide fiscal stimulus. He also cites the European Central Bank’s focus on inflation, which limits its willingness to cut interest rates.

Burbeck, who is underweighted in the region, adds the high leverage of the European banks to the region’s negatives.

Sterling cites surveys that show that the willingness of European banks to lend has declined sharply.

In addition, many Eastern European countries that had been buying goods and services from Western Europe have very large debt loads and are finding it hard to find financing. O’Reilly notes that those countries are part of the German export success story, which is currently in abeyance.

> Japan. The country is “relatively OK,” Burbeck says, while Sterling believes Japan will “probably muddle through.” But neither Burbeck nor Sterling, nor other money managers, are enthusiastic.

The Japanese, like most Asians, are savers. The population is also aging, and many Japanese are at a time of life when they are likely to reduce their spending. This makes it difficult for the government to stimulate the economy, says Ethans.

There is, though, a plus to the aging population: it provides the opportunity for companies to cut costs as older workers retire.

The Japanese banking system is also in good shape after years of working out bad loans, and there have been some adventurous acquisitions of troubled U.S. financial services assets.

On the other hand, the strong yen is a negative for exports. Many analysts expect the Bank of Japan to intervene in foreign exchange markets to keep the currency from rising further and perhaps even bring it down somewhat.

> China And Other Emerging Economies. Growth is slowing as the impact of sluggish exports to the U.S. hits producers in Asia. But there is evidence of some self-sustaining domestic demand. In addition, China, the economic driver of the region, has US$1.2 trillion in foreign-exchange reserves, giving it the fiscal room to fund a US$586- billion two-year stimulus package.

Nevertheless, there isn’t huge enthusiasm for investing in these emerging economies — and even less for increasing holdings in other developing countries. Latin America is being hurt by the big drops in resources prices, and Eastern Europe’s growth is dependent on large inflows of foreign capital, which have dried up. Burbeck, for one, is “quite worried” about the latter.

But that doesn’t mean money managers are ignoring the emerging market theme — only that they prefer to participate indirectly. Ethans and MacLean, for example, both invest in China using exchange-traded funds to get exposure to the country’s very large companies, such as insurers, banks, oil firms and construction companies.

> Resources. The majority view is that oil prices will move up to US$60-US$70 a barrel when it becomes clear that the global economy is growing and when supply constraints, which have been exacerbated by the current cutbacks in exploration and development, become evident.

There are, however, a few outriders. A few money managers expect the price of oil to increase to US$150 a barrel; another small group think the price could stabilize around US$35.

Managers are more divided on base metals. Some say that the sector will be slower to recover because it will take considerable time before businesses feel the need to expand capacity. But others point out that the fiscal stimulus packages being introduced by governments around the world are heavily geared toward infrastructure projects. Those will require base metals, potentially spurring an earlier recovery in prices and stock values.

There are also mixed feelings about gold. Some money managers feel that you can’t go wrong with bullion because it should flourish, whether the future brings continued deflation or, conversely, produces strong inflationary pressure. Other money managers don’t think there will be either the incentive or the funds to push gold prices up.

> Financials. The shares of banks are usually early leaders in a recovery. That’s because, as a bull market becomes established, investors anticipate lower loan-loss provisions, more lending and higher interest margins. Money managers see no reason for Canadian retail investors to invest in foreign banks when they have such strong ones at home.

> Information Technology. Many money managers like the prospects for this sector. These companies will play a central role when business investment takes off again. In addition, prices have been battered and there is considerable upside.

But a number of analysts warn that investors in technology need to be selective. Atkinson, for example, suggests computer- and chipmakers.

> Consumer Discretionary. This sector also is usually a leader in recovery phases, as consumers begin purchasing items put off during a recession. But how well these companies will do, given the sorry state of American household finances, is debatable. The U.S. is still, by far, the biggest consumer of these goods, and a number of money managers don’t expect a strong pickup in consumer spending in the U.S. in the next few years.

> Industrials. There is little enthusiasm for this sector. Some subsectors will benefit from infrastructure spending; railways, shipping and air freight will see earnings boosts as the recovery gets under way. But other parts of the sector will face “destocking” by customers and lower business investment, says Arnold. In addition, any subsector dependent on consumer demand could be slow to respond.

> Defensive Sectors. Normally, utilities, consumer staples, telecommunications and health care don’t outperform in bull markets. But you may not want to be in a hurry to underweight them. In a slow and gradual economic recovery, they offer safety in what otherwise may be a very volatile market.

In addition, some money managers like the prospects for health care in the industrialized world, with its aging populations. IE