Stocks Will Keep Rollin' in '07

"A resounding theme for our sector and portfolio strategy is a 'growth barbell,'" Belski writes. He expects to emphasize defensive growth and riskier, aggressive growth at different times during the year. Belski defines defensive growth as consumer staples, financials, health care and industrials. Aggressive growth includes telecom services, information technology and consumer discretionary.

For the time being, he has an overweight rating on a mix of industrials and telecom services, such as Verizon(VZ Quote), Vodafone(VOD Quote) and Mexico's America Movil SA de CV(AMX Quote).

In industrials, Belski suggests avoiding the transportation sector and buying conglomerates such as Emerson Electric(EMR Quote) and 3M(MMM Quote). He has underweight recommendations for energy and utilities and has consumer discretionary, consumer staples, financials, health care and information technology at market weight.

Belski also has a market weight recommendation for information technology, a favorite area of several strategists. He recommends "trading the cyclical swings" in companies such as Altera(ALTR Quote) and Molex (MOLX Quote), while owning tech "franchises" such as Microsoft(MSFT Quote) and Google(GOOG Quote).

Larry Puglia, manager of T. Rowe Price's blue-chip growth fund and U.S. large-cap core growth strategy fund, would stay away from semiconductors and buy the wireless interactive, handheld and multimedia stocks such as Apple(AAPL Quote) or Adobe Systems(ADBE Quote).

Many strategists have taken a balanced growth approach similar to Belski's, betting that the economy chugs along and liquidity persists while protecting against the possibility of rising inflation, a rate hike and/or a recession. But most also expect some volatility and a pullback at some point next year. Prudential's Ed Keon recommends a 10% cash position, as opposed to the aggressive investor's normal zero-cash allocation.