The investment landscape is currently dominated by no risk, no return investments at one end and high expected return, high risk investments at the other end with very little middle ground, according to Putnam Investments head of global asset allocation Jeffrey Knight.

"The building blocks seem to be clustered at the ends as 2009 begins," Knight said.

At one end of the spectrum there are low risk investments such as government bonds, particularly short-term government bills.

"They are the highest confidence investment that we can make today where we don't have to fret about being repaid," Knight said.

"But they're so popular as everyone is shunning risk that the compensation offered today is zero."

At the other end of the spectrum there is an array of investment choices and asset classes whose promised compensation risk premium has become more generous through the course of 2008, Knight said.

These include both equities and many categories in fixed income.

"The compensation for taking risk is higher than we've ever seen before, however their volatility is in uncharted territories," Knight said.

Knight expects this situation will remain as long as the deleveraging pressures continue in the market.

"The high volatility is due to the lack of a two-way market as everyone is trying to sell, so even safe and traditional low volatility investments are being met with a wild pricing environment," Knight said.

"Basically everything is down, so that uniformity of direction is an indicator that there is still a demand to raise money and that there is some indiscriminate selling."