The experts send Santa their Christmas lists as they look to the future

But many predict that investors willing to brave volatile equity markets will be rewarded by bargains and big returns. Markets have remained relatively buoyant this year, despite the escalating sovereign debt crisis in Europe. Fund sales have fallen, however, with investors pulling out of equities in November at a rate not seen since the banking crisis unfolded three years ago.

And 96 per cent of investment trust managers expect 2012 to be a turbulent one for markets, even though seven in 10 expect them to end the year higher, according to the annual survey by the Association of Investment Companies.

Their concerns centre on the eurozone, which two thirds of managers identify as the single biggest threat to equities over the next 12 months.

Perhaps unsurprisingly, the biggest tip for growth is emerging markets, followed by the US and Asia Pacific. Just 4 per cent of managers expect the UK to be the top performing region in 2012.

But what do the experts think?

Brian Steeples, managing director at The Turris Partnership

An uncontrolled implosion in Europe – the Armageddon scenario – is highly unlikely. Much more likely is the scenario where Merkel and Sarkozy take us to the brink of catastrophe only to “solve” the impending catastrophe with a more lasting solution. As a politician, this is much more likely to get you re-elected.

Once the investment markets perceive a meaningful resolution in Europe, we think there will be an uplift in sentiment and equity markets.

If the European Resolution occurs in 2012, I would expect the FTSE100 Index to end 2012 at around 5900-6000. In the meantime, until that resolution occurs, expect a rocky ride in the range of 5000 to 5500, with one day swings of 5 per cent not unheard of.

Where should you invest over the next 12 months? It is sensible to continue with caution for the immediate future. As such we would recommend remaining highly liquid along with investment in index-linked gilt funds.

Equity income funds (both UK and global) that have a strong track record of producing increasing dividends over a number of years are worth looking at.

The corporate sector has significantly reduced debt since 2008. Currently the corporate sector has debt of around 50 per cent of earnings, whereas it was 150 per cent of earnings in 2008, so there is a good case for expecting a continuation of dividend income from this sector.

Investment in this area should however be for the longer term (ie ten years or more) during which time we would expect to see capital growth in addition to the increasing dividend income payouts.

Alan Steel, chairman of Alan Steel Asset Management

What a year. But what can investors expect in 2012? Well, we know what the consensus thinks – that we’re doomed.

Recently volatility matched extreme levels last seen 30 years ago. There have been only four other years with as much volatility – 1942, 1962, 1974 and 1982. And they were all big turning points.

Over in the USA, still by far the largest economy in the world, three wise men are worth listening to – old timer Sam Eisenstadt, market historian Mark Hulbert and sentiment analyst Ned Davis. And they’re all positive about next year.

So what should you do? Why not copy the best football teams after they hit tough times?

They shore up their defence to cut out mistakes and leave nimble-footed attackers upfront to beat opponents.

So stiffen your portfolio defence with fund managers like Sebastian Lyon at Troy, Neil Woodford at Invesco Perpetual, James Harries at Newton and Bill Mott at PSigma.

But with the three wise men and contrarian factors pointing to a better year, I’d keep faith with match winners like Stuart Rhodes and Graham French at M&G and Robin Geffen at Neptune.

Real value lies in good quality international and UK income funds and, for growth, the developing world. Whatever you do, if you’ve got money to invest, don’t sit on the sidelines in cash.

David Thomson, chief investment officer at VWM Wealth

It’s a particularly uncertain time for markets, held hostage to European politics. Investors in government bonds should be particularly careful in 2012.

Because of the problems in Europe both UK and US government bonds attracted significant inflows in 2011, but defensive investors face some difficult choices in 2012 as interest rates are likely to remain low and the potential for bonds to produce further capital gains looks limited. Indeed we could see a re-run of 1994, when government debt collapsed taking a number of other asset classes with it. The trouble is that in the short term UK and US bonds still provide a safe haven so investors should still hold some.

Meanwhile yields on equities look attractive and while equity income funds have underperformed growth funds for some time, they may now prove a better option for investors seeking income. Inflation may return if the huge stimulus being applied to economies is successful and consequently we remain positive on the outlook for index linked bonds.

With the world outlook remaining relatively uncertain, we continue to believe it makes sense maintaining exposure to a variety of asset classes.

We remain cautiously optimistic but markets could change rapidly particularly if government bonds collapse and the key to success in 2012 will be to be vigilant and nimble.

Katherine Garrett-Cox, chief executive of Alliance Trust

We expect the prevailing issues from the latter part of 2011 to roll forward inexorably into 2012; the threat of a global recession, the weakness of the Western consumer and particularly the failure of the political leaders of the eurozone to move swiftly to address the full magnitude of the problem that faces us all.

Looking forward, we do believe that the eurozone leaders will eventually produce a solution that will adequately calm investors’ anxieties about the future of the euro project.

However, we do not expect that this will happen without the markets having been further tested, and this will be demonstrated through continued volatility of equity prices.

Despite this, we believe that the ongoing uncertainty presents a real opportunity for investment trusts and other long-term investors to gain exposure to quality companies, in the eurozone and elsewhere, at attractive valuations.

Alec Stewart, head of asset management at Anderson Strathern

With market volatility looking set to remain with us during next year, in the face of eurozone debt problems, a vacillating global economy and forthcoming debates to set fiscal budgets in the US, we have two tips to satisfy both speculative and more cautious equity investors. Shares in pharmaceutical companies have offered strong returns during 2011. The FTSE World Pharmaceutical & Bio Index has returned almost 10 per cent over the last year. Pharmaceutical stalwart GlaxoSmithKline has returned to levels last seen in May 2007, although the shares remain around 65 per cent off the price highs achieved in 1999.

Investors should also remember that compared to other investment sectors, pharmaceuticals did not enjoy the same hubris before the fall.

With interest rates at historic lows and inflation expected to fall, AstraZeneca’s prospective yield of approximately 6.5 per cent and GlaxoSmithKline’s yield of approximately 4.8 per cent should provide them sufficient demand to support current share prices.

Vladimir Putin’s intention to return to the Russian presidency next year has sparked unrest among middle-class voters, especially after reports of vote-rigging in recent parliamentary elections. Nevertheless, for the higher-risk investor Russian equities remain cheaply priced and offer good value for 2012.