Modest growth is predicted for 2011 approaches, with equities showing promise and emerging markets looking particularly attractive for investors, according ING’s head of asset allocation.

In a breakfast presentation Tuesday, Paul Zemsky said, “Our outlook is modestly positive.” The U.S. economy won’t see roaring growth, he added but he doesn’t think a double-dip into recession will occur either. In addition, he said, “We’ll be in a disinflationary environment for some time.”

Zemsky’s remarks came the same day that the government reported that wholesale costs in the U.S. rose less than expected in the month of October, because the prices for trucks, cars and computers dipped. The producer price index rose only 0.4% from September, the Labor Department stated. But, the core PPI dropped 0.6%. Lower prices for light motor trucks and passenger cars led the October decline, falling 4.3% and 3.0%, respectively.

“On the inflation front in the developed world, there just isn’t any,” Zemsky said. “There’s absolutely no evidence of inflation coming.”

ING is predicting equity indices to rise—with the S&P 500 at 1300 by the end of 2011, the Europe Stoxx 600 at 310 and the MSCI EM Free at 1350. The low interest environment couple with low inflation will spur performance at companies in the developed markets. At U.S. companies, “balance sheets are in a fantastic place,” Zemsky said. Companies are spending very little of their cash flow and they have the funds to do share buybacks, acquire other companies or engage in capital spending.

The big story, however, is in emerging equity markets. “The tumblers are all lining up for a positive and strong year for emerging markets,” Zemsky said.

ING’s chief investment officer, fixed income and proprietary investments, Christine Hurtsellers, pointed to Indonesia and Hungary as strong economies but also noted that they are not entirely devoid of risk. For instance, foreign investors, own 60% of Indonesia’s debt, which puts it at risk of a liquidity crisis, she said.  

In addition, certain fixed income sectors such as high yield, senior bank loans and emerging market corporates should continue to perform well, Hurtsellers said.

Commodities are another favorite. “The need for commodities didn’t stop,” Zemsky said. But it did put them on hold. Yet, he said that ING believes that demand is coming back quicker than supply, pushing commodity prices up.