More gloomy economic news heightened fears of a deep-set global recession and weighed on global stocks Tuesday. As a result, strategists are lowering their estimates for corporate earnings next year. When will the turmoil end? CNBC's experts have their say:
EPS Estimates to Fall 50% in '09
Earnings-per-share estimates for companies are expected to fall between 40 and 50 percent next year, according to David Karsbol, market strategist at Saxo Bank.
"We have a very, very, very severe contraction of the world economy here and it seems likely that it would happen by late 2009 that we have EPS coming in 40/50 percent lower than what we are currently seeing," Karsbol said.
He also sees total writedowns amounting to $2 trillion when the financial crisis is over.
More Short-Term Upside for Dollar & Yen
There could be more upside for the greenback and the yen over the course of this week, believes Euan McCreadie, senior corporate dealer at OzForex.
Expect Dollar Rally to Fizzle
The recent dollar strength is a short-covering rally, believes Paul Schulte, head of macro strategy at Nomura International. He tells CNBC why he thinks the dollar will likely weaken in 2009.
Yen's Strength Won't Last into 2009
The yen held its ground despite data showing that Japan's current account surplus shrank 48.8% in September. But Callum Henderson, head of FX strategy at Standard Chartered believes the yen's strength will not last into 2009.
Worst to Come in 2011
Chris Locke, MD at Oystertrade.com sees a multi-week or multi-month rally for the Japanese index through to early 2009. But he also said that after the rally, stock markets have further to fall and that we won't see the worst of the turmoil until 2011.
"We could be in the position where we're about to correct 100 years of upside rather than just correct the last part of the bull market for the 1970s," Locke said.
Stay Defensive, No Rally Ahead
"I don't see a rally until the middle part of next year at the earliest," Neil Michael, head of quantitative strategies from SPA ETF, told CNBC.
The most resilient sectors that investors should hold in the face of the slowdown are consumer staples and health care, according to Michael.
Energy, basic materials, industrials and information technology are areas of concern, he said. Those sectors have benefited from high commodity prices and buoyant emerging markets, but no longer have that support, he added.
Short-Term Value in Bonds
We've got a little bit of a rally in all the bonds markets at the moment, on news that China's inflation and growth rate has reduced considerably, Basil Kaye, head of strategy at MET Traders said.
We're in a bit of a bull market, in the 10-year sector especially. European bonds and UK bonds are all looking very strong at the moment, Kaye added. Kaye said he will sell the bond market when European yields hit 3.25%.
Dipping Back into Resources
In 12 to 18 months' time, Kirk West, Asia MD at Principal Global Investors believes commodity prices will be higher. As such, he recommends selective accumulation in the resources space.
Precious Metals Regain Luster
Prices of precious metals may head higher, forecasts Peter McGuire, MD at Commodity Warrants Australia.
Create a Diversified Portfolio
Investors should look to create a more diversified portfolio, thinks Kirk West, Asia MD at Principal Global Investors. He sees real opportunities in each sector, and recommends a portfolio that spans across all sectors.
UK Housing Market to Fall Further
If the UK economy goes into a recession in 2009, the housing market is likely to bottom next year. However, if the economy falls into a depression, the housing market will only possibly begin to improve in a decade, Roger Nightingale, economist at Pointon York said.
Sidestep South Korea
South Korea has to go through some painful deleveraging, says Paul Schulte, head of macro strategy at Nomura International. As such, he does not think it is viable to invest there.
Overweight on China
Invest in China's services sector, recommends Erwin Sanft, head of China & HK research at BNP Paribas Securities. Sanft, who is now "overweight" on China, reveals his other sector picks.
China's CPI May Fall Under 3% in '09
China's CPI is likely to ease further, falling below 3% in 2009, forecasts Peng Wensheng, director & head of China research at Barclays Capital. He tells CNBC that this will provide the PBoC with more room to cut rates.
Inflation: No Longer an Issue for China?
Inflation will no longer be an issue for China, says Liao Qun, chief economist of China banking at CITIC Ka Wah Bank, as data showed that it is easing rapidly.
Not All Bad for the US
There are still parts of the US economy that are doing well, according to Bob Baur, chief global economist from Principal Global Investors. Technology, aerospace, agriculture, medical supplies, education, basic resources and materials are all strong sectors, Baur told CNBC.
Bond Yield Curve to Steepen
"We still think the yield curve has got further to steepen, there has been no process of bank recapitalization in history that didn't take place without steepening of the curve," Nick Parsons, head of strategy at nabCapital Markets, told CNBC.
A steepening of the yield curve would result in higher yields for long-term bonds, in comparison to short-term bonds.
Reflation to Boost Commodities
"There's a big reflation going on, or just starting, so I think gold will benefit next year … Also commodity prices will come back, maybe not to the levels we saw, but certainly this is a reflation in the making, Kevin Sullivan, head of portfolio management from Clariden Leu, told CNBC.
Watch all three of the above analysts discussing their strategies here >>>