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S&P analysts give their forecast in the consumer discretionary, consumer staples, efficacy, financial, and health-care group

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What can investors expect in spite of key stock-market sectors in 2009? Analysts from S&P Equity Research Services offer their views in this two-part story. Part one follows:

Given S&P Economics’ foretelling of increases in the unemployment and savings rates in 2009, we see most consumer discretionary categories feeling the press close together.

Elsewhere, foot trade has fallen off at casual-dining chains, and a pickup isn’t expected until late 2009 at the earliest. Housing prices are expected to continue to decline end mid-2009, but housing turnover is expected to remain at weak levels for the year.

The automotive industry faces a cash crunch, after posting the lowest sales in about 25 years for the time of the by two months. We expect another contraction in light vehicle sales in 2009, from one side the Detroit Big Three losing further share.

In media and time to spare, we expect overall traditional advertising spending to decline markedly in 2009, with meagre cutbacks from key categories (auto, financial services, sell in small quantities, etc.).

We think the consumer staples sector is relatively attractive in the current difficult household and international economic environment, since we expect consumer spending on such items as food, beverages, and household products to be in greater numbers uninterrupted than on this account that more discretionary goods. Partly to protect or even expand market share, we expect increased marketing expenditures from branded products manufacturers. Also, we rely upon manufacturers to favor from declines in article of merchandise costs, including energy and various agricultural ingredients, but likely on a lag lawful claim to hedging or supply agreements.

We require a positive fundamental outlook on the integrated oils, which make up nearly 70% of the market value for the sector. And the arrange has the second-highest STARS ranking behind telecommunications. The sector also sports the lowest price-earnings ratio on projected 2009 operating earnings of all 10 sectors.

However, we expect lower projected energy prices will influence 2009 earnings. The esteem pass is intensifying the impact on the zeal sector, as capital expenditure budgets are cut and projects are delayed. We are pessimistic on supply trends, and see little help from President-elect Obama’session energy policies, which are focused put on reducing oil and gas consumption.

We also count upon a sizable pullback in independent exploration and production (E&P) drilling budgets upon the body weaker pricing, which should lead to lessen production, proceeds, and cash flows.

In the oilfield services and drilling space, we expect lower E&P capital spending to surpass to decelerating 2009 demand for oilfield services (mainly in North America), but the offshore drillers should have existence better protected through a strong backlog of contracted work, especially in deepwater, where rigs are scarce.

Although we are concerned that weakening credit will continue to weigh on the earnings of diversified financial services companies and arising from traffic banks, we are encouraged by the agency of market-share gains, and the validation of the large bank model in light of the demise of investment banks. We have a negative outlook on regional banks, as we think the weakening economy will disadvantage the good repute quality of non residential construction and engaged in traffic lending.

Although managed balances have come under pressure, we look favorably upon the strength of the asset managers’ balance sheet. We have a taking no element with either side stance on the property-casualty industry, as we think premium rates with respect to many lines of coverage command likely firm (albeit modestly) in the earsh of record storm and investment losses and the absence of competition, offset by balance sheet concerns. We also have a neutral outlook steady the life and health security against loss industry, while low historical valuations are offset by our concerns about weak revenue growth.

Although the prevailing view is that health care is a defensive sector and is recession-proof, we believe several issues, particularly the global economic crisis, high unemployment, and the strengthening dollar, temper that viewpoint. However, we tranquil wait upon several bright spots including biotechnology, whither we see solid growth and continued inquisition of currently marketed products for new labeled indications

We see pharmaceutical firms bolstering their pipeline end acquisitions. The new control should advantage the life sciences sector—Obama has stated he plans to double the research governmental estimate within 10 years, and we believe the general theme of cost-cutting should benefit outsource service providers in the same state as contract research organizations.

We view high unemployment affecting managed care enrollment and prescription sales and believe Obama’s desire to change Medicare part D to allow the government to treat pricing by drug firms will adversely affect sales.

Original text: http://www.businessweek.com/investor/content/dec2008/pi20081228_193282.htm?campaign_id=rss_null