The overhang of national debt will cast a very heavy shadow over the 2013 global economy, upholding the continued view of caution held by an international investment manager.
"We continue to expect the economic outlook to remain challenging in 2013," Threadneedle chief investment officer Mark Burgess said.
"The overhang of national debt will cast a very heavy shadow for an extended period and for this reason, we remain cautious of companies that are heavily reliant on government spending."
Looking to 2013, the overall environment was one of uncertainty, although some of the risks that drove significant headlines in 2012 - the Chinese leadership transition and a complete disintegration of the Eurozone - are perhaps less concerning for markets than they were a year ago, Mr Burgess said.
Threadneedle held a very cautious view of the global economic environment for some time, but on a positive note, the manager believed there may be grounds to expect some improvement in macro data in the near future.
"In the USA, there have been a number of better than expected data releases recently," Mr Burgess said, adding that the housing market appeared to be showing a useful recovery.
"While uncertainty over the presidential election has been resolved, the fiscal cliff continues to cause concern and has led companies to postpone investment decisions.
"We expect more details of the measures to tackle the fiscal cliff shortly and this may release some pent-up demand in the more predictable environment that should follow. In any case, while politicians may be slow in coming to an agreement, we believe it is very unlikely that lawmakers will actively try to legislate another recession.
Looking at equities, Threadneedle had generally lower than consensus forecasts for corporate earnings growth in 2013.
"The most recent USA reporting season, third quarter 2013, has been a fairly mixed one, with a higher percentage of disappointments than we have seen for some time, although the pace of downgrades to forecasts appears to have slowed," Mr Burgess said.
"The scope for earnings to disappoint, even as macroeconomic tail risks appear to be abating, highlights the importance of making the right stock selection calls, as well as investing in the most appropriate blend of assets for a risk/return target."
Threadneedle continued to question fixed income's appeal of so-called safe haven core government bonds, such as United Kingdom gilts and German bunds.
Yields remained at historically low levels and were particularly unattractive in real terms, and the risk of capital losses down the road was significant, Mr Burgess said.
Alternative assets were likely to remain popular with investors who were uncomfortable with the volatility inherent in equity investing, he said.
Commodity markets were expected to be pulled in different directions in 2013, with the latest round of quantitative easing most likely to benefit precious metals.
"Investors head into 2013 knowing that few of the fundamental economic problems in the developed world have been solved, and many of them could remain unsolved throughout the year," Mr Burgess said.
"However, as 2012 has shown, a situation that goes from worse to bad is one in which astute investors can make considerable amounts of money."
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