This year, like last, presents investors with an array of risks. Europe seemingly creates new financial and economic concerns daily, while, in the United States, fiscal questions and election uncertainties trouble the outlook. Still more dangerous issues surround the military and diplomatic maneuvering in the Persian Gulf. And these are just a sample of the sources of investment concern. But even as all this prompts people to hide in cash and the usual safe havens, such as U.S. treasury bonds, these investment choices pay such poor yields that presumed safety comes at tremendous cost. Investors, then, must consider riskier investments.

Among those choices, credit-sensitive fixed-income instruments would seem to offer superior returns with reasonable security. Among equity choices, opportunities also present themselves. Among developed markets, North America seems to offer the best risk-reward balance. Though stock valuations are better in Europe and Japan, the one still needs to deal with its debt crisis and the likelihood of recession, while the other faces the very fundamental matter of severely aging demographics as well as the immediate adverse impact of an expensive currency. Emerging markets, though, offer a reasonably bright outlook. Though they are not likely to generate anything near their former growth and return records, they still promise much more impressive rates of expansion than the developed world, which, given rather attractive valuations in these emerging markets, promises much improved equity returns. Here, then, is a brief analysis of the situation in each area and the associated investment prospects.

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