In spite of U.S. and European economic and fiscal woes, speakers at a T. Rowe Price Investment Outlook event today pointed to investment opportunities in emerging markets, as well as large-cap and technology stocks.

"The macro outlook is fairly gloomy. Investors are concerned with the European debt situation, the U.S. fiscal crisis and a feared recession. It's no wonder performance has been punk the past year. The S&P 500 is down about 5% year to date," said John Linehan, head of equities at T. Rowe Price. Linehan rattled off Time Warner Cable, Microsoft, Canadian Pacific and Chevron as large-cap stocks he favors.

The failure of Congress' supercommittee to agree on a plan to cut $1.2 trillion from the U.S. deficit has paved the way for an election-year battle in which some Republicans hope to stop $600 billion in automatic defense spending cuts mandated under sequester rules. President Obama said Monday night that he would veto any effort to alter those cuts.

"Under the sequester process, defense will make up about half of the $1.2 trillion in cuts with the remainder coming from a range of programs. The failure of the committee to agree on measures for serious fiscal reform is another blow to investor confidence," said T. Rowe Price Chairman of the Board Brian Rogers.

According to T. Rowe Price data, America's European exports will suffer as demand in Europe declines in the face of a possible break up of the European Union. "The cycle we're seeing now in Europe is one of weaker economic growth, calls for austerity,  further economic decline, which is not sustainable. We'll either change the dynamics and escape the current reinforcing cycle or risk a Eurozone collapse. Our base case is a weak escape rather than a collapse," said Mike Gitlin, director of T. Rowe Price Fixed Income.

A voluntary 50% cut for Greek bondholders, an enhanced rescue fund and austerity measures have provided some stability to Europe, but they are not enough to induce long-term solvency, according to T. Rowe Price data.

"If funding markets don't open up and they run out of collateral, one solution is a Pan European fiscal response that levers up $350 billion in the European financial stability fund into a special-purpose vehicle," says Samy Muaddi, T. Rowe Price vice president and credit analyst. "As with Greek and Irish banks, the ECB can also accept nontraditional collateral, such as government guaranteed bonds issued within the system domestically."

The upside of so much fiscal and economic uncertainty can be found in emerging markets and global technology stocks. A shift in emerging-market monetary policy has begun from tightening to easing, according to the International Monetary Fund.

"Now's the best time to be a technology investor because there's so much change and innovation happening," said David Eiswert, T.Rowe Price's portfolio manager of the Global Technology Fund and the Global Technology Strategy Fund.  "We're experiencing technology on a global basis in the emerging markets. There's a huge opportunity for value to be created. When you add in the risk of deleveraging and the sovereign crisis, it's important to be a stock picker."

Eiswert favors Apple, Juniper Networks, Priceline, Samsung, Ariba Networks and Tibco, while Scott Berg's Global Large Cap Stock Fund and Global large Cap equity strategy is overweighted 5% in Brazil.

"Brazil is facing inflationary and budgetary pressures, but from a position of relative strength. Their economy is self sufficient on energy, agriculture, farming, iron ore, materials and oil. GDP is growing at 4% compared to 9.5% in China and India is growing at 8%," said Berg.

With $2.7 trillion tucked away in money market assets earning a very low yield, Americans are too cautious heading into the new year, Rogers said.

"In this environment, we are seeing an irrational quest for safety. Investors are terrified of risk and therefore are willing to accept virtually no yield for the safety of money market funds. And corporations are carrying high levels of cash and low debt," said Rogers.

-Juliette Fairley