"About 300 of 450 companies in the S&P 500 reported earnings surprises for the third quarter. That's two-thirds that have had positive earnings partly because companies aren't hiring. So they are getting top line revenue growth, keeping expenses low and profit margins are increasing, which is great for companies but not so great for workers. Overall, this has led to higher profits," said Zemsky.
Global REITs are expected to continue performing strongly as the sector experiences steady cash flows from the commercial property sector, but investors would be wise to also look into mid-cap stocks, which Cote labeled the equity market's sweet spot.
"For the past decade, they have trumped large-cap stocks. Mid-cap companies have the financial wherewithal of large-cap stocks, but with the growth prospect of small caps," says Cote. "I would invest a 60/40 portfolio with a good contingent of mid-caps because that's how you will get a return."
"Europe's runaway debt problem will happen in the U.S. unless there's progress on the budget. If the supercommittee doesn't come up with a rational program and Congress doesn't enforce the budget laws, we're headed for an untenable situation based on the size of our debt," said Zemsky.
ING IM maintains a positive outlook for most fixed-income risk sectors, with high-yield and emerging-market debt (EMD) being a favored area for 2012.
"We're overweighted in high-yield because the yields are at 9% but we are underweighted in investment-grade bonds," says Zemsky.
The fundamentals of high-yield corporates look appealing, Hurtsellers notes, with low default, improving credit quality and lowered inflation.
"With coupons at or near 8 percent and the possibility of capital appreciation, high yield appears to be a particularly good opportunity," said Hurtsellers.
-Juliette Fairley