How to Navigate 2008's Stormy Markets

Global stock markets will continue to offer good opportunities this year and emerging markets will go on making strong gains, despite widespread fears of a global recession, James Bevan, chief investment officer at CCLA Investment Management, told "Worldwide Exchange" Friday.


But investors must learn to play volatility rather than fear it, Bevan added.

"I'm really bullish (on stocks in 2008) … I see valuations of equity markets globally as still offering very good value for people prepared to experience a bouncy ride," he said, adding that payment for taking risks is still way above what is warranted.

Many market watchers expect corporate earnings to collapse this year because of an economic slowdown in America. Bevan agrees that earnings are likely to slow, but says U.S. corporate earnings would need to drop by well over 20 percent before stock markets would start to become vulnerable.

He said once the worries dissipate investors willing to take the risk of investing in stocks may reap the rewards.

"Markets climbing a wall of worry tend to do really rather well," Bevan said.

Emerging Markets

A stellar 2007 for emerging markets, coupled with the credit squeeze, has contributed to the widening assumption that the performance cannot be repeated in 2008. The reason usually cited is export links to the U.S. being hit by tightening consumer spending, but Bevan disagrees.

He said emerging markets are growing strong and are already "semi-independent" of what happens in the developed world.

"I see the emerging economies continuing to plough on ahead," Bevan added.

There are still "great opportunities" in Asia and Latin America, he said, adding that "I'm still looking for double digit real growth from China this year."

Where to Invest?

Food and beverage stocks are strong defensive plays to counteract a slowdown in earnings, according to Bevan, who said "if you can tack onto that emerging market exposure as well, then you've got it in spades."

Bevan singled out drinks giant SAB Miller as being a good investment and "strategically much cheaper than the U.S. majors." French food group Danone was also favored by the London-based investor.

On a more cautious note, Bevan said the low-end U.S. consumer market was susceptible to a slowdown, because it could be one of the sectors most squeezed by the recent banking crisis.

Another investment opportunity suggested by Bevan was base metals, but investors should be very careful of ploughing money into the sector "because prices are very firmly stretched," said Bevan.

"I think the precious metals and platinum in particular still offer a great opportunity, so I'd be looking at Lonmin in particular, but also at Anglo American," he said.