The global economy will regain momentum after a temporary slowdown in 2007, Credit Suisse predicts. With that outlook, the global financial services giant favours selective investment strategies and theme-oriented investments.

“After temporarily slowing, global economic growth will pick up again noticeably next year,” the firm predicts, driven by strong European growth and a rebound in the U.S. “This may be accompanied once more by slightly rising money market rates.”

Credit Suisse’s analysts anticipate further gradual interest rate hikes. “While the pause in the rate-hiking cycle in the U.S. could last for some time due to the sharp slowdown in growth there, further cautious interest rate increases can be expected in the euro zone,” it says.

“At present, though, the financial market situation is still being impacted by economic uncertainties that will also continue to weigh on the U.S. dollar in the short to medium term,” it adds. However, it believes that as U.S. economic prospects brighten, “the dollar too should be able to regain steam. Hence, the current uptrend on the equity markets should continue, albeit amid increased volatility.”

The disparate performance of different commodity classes is likely to remain a main theme for investors in 2007, Credit Suisse predicts. Investors should therefore shy away from investing in commodity indices and instead concentrate on specific themes in individual commodity categories such as gold, it counsels.

Global equity markets should benefit from solid earnings growth and an attractive valuation in 2007, it says. The analysts anticipate that the current uptrend will continue but expect to see increased volatility depending on the U.S. Federal Reserve’s interest rate policy.

The favoured regions on a 12-month horizon continue to include Asia, selected emerging markets, and Europe in preference to the U.S. The Asian market should continue to profit from vibrant economic growth, particularly in China, whose economy is expected to expand by 9.8% in 2007. Once the recent uncertainties subside, the Japanese stock market will have upside potential on the back of the revival of domestic consumption and robust exports to Asia, it notes.

In the emerging markets excluding China, analysts continue to recommend markets with low valuations and above-average growth potential, such as Brazil and Russia. In Europe, Germany remains the preferred market in view of ongoing corporate restructuring efforts.

It adds that growing risk awareness constitutes a good reason to adopt theme-oriented investment strategies. Analysts at Credit Suisse regard equity investments in the infrastructure, alternative energy, water, emerging market private banks and the luxury goods sectors as particularly promising.

They also recommend selective strategies for other asset classes such as real estate, commodities and bonds for 2007. “Real estate continues to present attractive investment opportunities from both a cyclical and structural perspective,” it says.

In the corporate bond sector, the analysts at Credit Suisse recommend investment-grade borrowers. Inflation-protected bonds additionally present good entry opportunities, it adds.