The U.S. subprime-mortgage crisis sent shockwaves thoroughout world markets.
It certainly took the luster off financial stocks, pushing that sector down about 21 percent in 2007.
It also caused extreme volatility with the CBOE Volatility Index up nearly 20 percent during the same period.
But even with this turmoil, there were plenty of places to make money in 2007. Crude oil prices posted their biggest annual gain in a decade, and gold prices made their biggest advance since 1979.
But what about 2008? What fresh ideas will make investors money in the coming year? CNBC asked some experts to weigh in with their thoughts.
Municipal Bonds Get Their Day in The Sun
Municipal bonds are an overlooked investment opportunity, according to Mike Holland, of Holland & Co.
There’s a good reason that investors like Warren Buffett are looking at municipal bonds, he said. Holland explained that many of these investments don’t really need to be insured, but they are.
“You don’t have to worry if they go bump in the night,” Holland said.
“People are worried about lower-quality fixed income,” he said. “If you look at the municipal bond market, which most people don’t, it’s yielding the same thing (as two-year Treasury notes) and you don’t pay taxes (on the investment gains).”
Low-End Retailers and Rent-To-Own Companies
Greg Estes, a portfolio manager at Intrepid Capital Funds, expects markets to ride out another volatile year in 2008.
His advice for investors: "Let the volatility work for you, and just wait, wait, for the right pitch."
At the moment, he likes low-end retailers and rent-to-own companies. His picks include Rent-A-Center and Aaron Rents as well asFamily Dollar.
Rent A Center and Aaron Rents are currently trading at "seven-to-eight-times free cash flow," Estes said. Meanwhile, Family Dollar has a "very clean" balance sheet, he said.
Currencies & Oil in '08
Happy New Year for the Dollar?
The U.S. dollar is on pace to log its biggest annual decline in four years. But what will the New Year bring?
Meg Browne, of Brown Brothers Harriman, says the dollar is nearing its cyclical bottom because she expects investors to begin to react to the the U.S.'s "pro-growth" fiscal policy and the rounds of interest-rate cuts.
As a result, Browne expects the Canadian dollar and the sterling to continue to weaken against the dollar.
However, Chuck Butler, of EverBank WorldMarkets, disagrees. He still says the best bet is on Asian currencies such as the yen, which have not participated in the dollar's weakness to date.
$100 Oil: A Floor or a Ceiling in '08?
Crude oil prices started off the year at about $61 a barrel.
"It's been a heck of year," said Adam Hewison, of ING.com. "Oil is up (about) 55% for the year."
Hewison expects to see another year of strong oil prices, propped up by several trends. Among them is strong demand and an uncertain geopolitical climate.
"In ten years, you've gone from bicycles in Beijing to BMWs," he said, explaining that China's growth is creating new demand for oil.
Meanwhile, John Kilduff, an energy analyst at MF Global and a CNBC contributor, expects there to continue to be "some upside vulnerability" for oil prices next year.
However, with the Bush Administration entering the last year of its term in office, some of the geopolitical premium will come out of the oil price, he said.
Other trends that may tame oil prices next year? A slowing U.S. economy, a rebound in oil inventories and a stronger dollar, Kilduff said.
Think Small, Win Big
It's been a rough year for small-cap stocks, with the Russell 2000 down nearly 3.5 percent in 2007.
However, Mary Lisanti, chief investment officer at AH Lisanti Capital Growth, said there's more to the sector than those numbers would suggest.
According to Lisanti, growth stocks in the small-cap sector have outperformed the market and she expects that as long as the U.S. doesn't slip into a recession, those stocks will continue to do well in 2008.
"If the economy just slows, but doesn't stop, what will happen is the growth end of the market will continue to do well because they are not impacted as much," Lisanti said. "Partly, because these companies are small. They are in the early part of their growth phase."
Health-care, technology and energy are the three sectors Lisanti favors.
Within the health-care sector, mergers and acquisitions will likely help drive stock values higher.
Within the technology sector, Lisanti is more cautious about consumer-related technology companies, which could see their growth slow if consumers cut down their spending.