Liechtenstein’s VP Bank has predicted
continued turmoil in the year ahead, warning that equity markets
will remain volatile and bond portfolios must be diversified.

In VP Bank’s Investment Views January
2012 report, it backs emerging economies to do well in
2012.

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The report expects Asian economies to emerge
as strongest in 2012 but it also predicts that China will fall
short of its forecasted growth.

 

Diversify Bonds

VP Bank’s Investment Views January
2012 report said that recent price fluctuations in supposedly
safe bonds highlight the importance of diversification in a bond
portfolio. VP Bank recommended that investments should be spread
over various issuers to reduce volatility.

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Equities Remain Uncertain

Looking at equity trends, VP Bank predicts
that the macroeconomic environment means that equity markets are
likely to remain directionless until new stimulus emerges.

Within this pessimistic outlook the bank said
that it prefers the US equity market, and within Europe German
equities are favoured.

Looking at sector weightings for 2012, VP Bank
has advised investors in Europe to be overweight on healthcare and
underweight on consumer staples.

For those investing in North America VP Bank
has recommended being overweight in the IT sector and underweight
in utilities.

 

Dollar to benefit

Given the uncertainty over the outcome of the
European debt crisis, the report expects the US dollar to benefit
from heightened risk aversion.

However, it warns that this benefit will be
short-term and that further appreciation in the medium-turn looks
unlikely.

 

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