Asia’s GDP expansion will outstrip that of any other region in the world, predictsJP Morgan Asset Management, but growth will slow as trade with Europe drops.

In its review of 2011 and outlook for 2012 the firm also predicts Latin America’s commodity exports to China will continue, benefitting both Brazil and Mexico due to rising internal demand. Growth is also expected in Japan as the country recovers from the dual disasters of an earthquake and tsunami.

The best potential returns from asset classes include higher-yielding fixed income, such as emerging market debt, as falling risk aversion and appreciating currencies result in positive returns. Corporate high yield debt also looks attractive as companies have enough cash to make interest payments, it said.

The firm expects equities to recover losses from this year as the outlook in Europe improves but there will only be moderate gains. Stocks with better dividend yields should provide some additional cushion. 

It believes that in the run-up to the US election fiscal and monetary policy is likely to stay expansionary.

Traditional safe havens will offer scant potential returns due to the eurozone crisis. It predicts lower growth reaching 0.5 per cent with reforms required to boost economic competitiveness taking years to bear fruit. Planned cuts to debt-to-GDP ratios mean a fiscal contraction of €150 billion ($200 billion) in 2012.