Your Best Market Bets for Profit in 2003

Crushed by stocks and rewarded by bonds for three years running, many investors will go with the flow and position themselves for more of the same as they look ahead to 2003.

That's likely to be a mistake.

Thanks to several economic and political forces -- plus a bullish signal from corporate insiders buying their own shares -- it makes the most sense to expect decent economic growth next year that will favor cyclical stocks and hurt bonds.

Expect lots of hand-wringing along the way. But when all the books are closed on 2003, the economy should post growth in the 4% range. Even economists and value managers not known for their optimism during this bear market point to such an outcome. And if they're right, that economic expansion should be enough to favor shares in economically sensitive areas like energy, industrials, basic materials and technology -- though don't expect a party like it's 1999.

Iraq, China, Terrorism on the Horizon

Going With -- or Against -- Mutual Fund Flows Investors track flows as a counterintuitive signal for next year's hot sectors. But this carries risks.

The Cheap and Easy Route to Mutual Fund Success Dagen also weighs in on when to sell a stock and why JDS Uniphase will never see 1999 levels again.

To be sure, it's impossible for anyone to be certain how the future will unfold. And next year, there are plenty of problems that could rise up to derail a strong growth scenario. China, for example, will continue to steal manufacturing jobs, hurting companies and capping employment growth in this sector in the United States. Meantime, U.S. consumers already own more than enough big-ticket items like cars and appliances -- the kinds of purchases funded with the help of low interest rates and a home refinancing boom that's winding down.

No one knows what will happen with Iraq or terrorism, or how much bad news on these fronts will hit stocks. And what if the Democrats manage to foil Republican efforts in Washington to juice the economy ahead of the next presidential election?

Indeed, because of these risks -- and uncertainty about the stutter-step recovery -- you can expect last year's record market volatility to continue. In short, it's likely to be another trader's market, but with a bias to the upside and cyclical stocks. Here's a closer look at some of the major investing trends.