Will the Grinch steal Christmas for investors this year?Investors looking for a robust Christmas season to juice retail sales and spur the languishing economy might need a telescope this year.Many economists agree that the ongoing political wrangling and related economic fallout from the seemingly endless European sovereign debt crisis are likely to crimp retail sales in Europe and North America this holiday season.Nevertheless, pockets of opportunity will open up for the most innovative retailers: Those with a strong technology platform and those possessing the agility to penetrate the rapidly growing middle class sector found in many developing countries.Overall, revenues supporting the top and bottom lines of strategically positioned global retailers and innovative consumer product manufacturers will be bolstered by online sales and emerging market consumer demand.Consumer ReportsOn balance, the US seems to be making a modest comeback from the late summer ‘double dip' recession fear patch. So far in November, retail sales posted their 5th consecutive gain, rising 0.5 percent rise for the latest month and housing showed signs of stabilization with US housing starts (new homes built) increasing 18k more than expected.Good news was also heard on the employment front with new claims for unemployment insurance dropping below 400k to 390k, the lowest level since February of this year. In the closely-watched employment arena, continuing claims for unemployment insurance fell to just over 3.6 million, the lowest level in since September of 2008.While on the surface these data points look good, components of the overall income and spending mix tell a different story.For example, personal income has not been rising as fast as spending indicating that Americans are digging more deeply into their savings amid weak wage growth.Importantly, the consumer savings rate as a percentage of disposable income has plummeted from a high of 8% reached during the depths of the credit crisis in 2008 down to just 3.6%.Some market observers assert that the US has been slipping back into its old pattern of overspending and borrowing to afford a bigger lifestyle.Clearly, this trend is not sustainable over the long haul and especially not in consideration of America's ageing population which needs to save for retirement.Furthermore, the overall economic growth environment is quite likely to soon receive a serious jolt from the slowly imploding euro zone which could cause consumers to pull back on purchases at least somewhat through the end of this year and into the next.Already, the National Retail Federation, an industry trade group, is forecasting a 2.8 percent increase in US sales for the November-December holiday season, down from the 5.2 percent increase in 2010.Emerging ConsumersWhile Europe and America are expected to struggle this season, emerging markets will likely once again lead global retail sales growth.According to the Hong Kong Trade Development Council (HTDC) last year in the aftermath of the financial crisis, Christmas sales in emerging markets were stronger than ever.The HTDC stated “Year-end sales soared on the Chinese mainland and in emerging markets such as Russia, Brazil and Chile.”The report also mentioned that the major European economies were reporting lower sales with many of the largest countries in decline.With the euro zone even more conflicted than last year, a repeat of this pattern can be expected.On the other hand, Asian spending is likely to continue to excel even though Christmas is not technically a holiday throughout the region.Looking south where Christmas is celebrated, South America also has the potential to deliver another robust season.While the US debates the budget and Europe struggles with solvency, the emerging Latin countries are poised to fare well.Even as the rating agencies outlooks have become increasingly negative on for European creditworthiness, Standard & Poor's Ratings Services recently raised Brazil's sovereign rating.The long-term foreign currency sovereign credit ratings were upgraded to BBB from BBB- and the long-term local currency ratings were raised to A- from BBB+.Along with many of the local developing country players, many large, developed world companies may also prosper as the most agile ones have been going global for awhile.In fact, much of the strong earnings reports that we have seen in last few quarters can be attributed to deft emerging market penetration.Successful multinationals include teen clothing retailer, Abercrombe & Fitch and apparel maker, Limited Brands.High end products are trending particularly well as emerging market consumers flock to known brands in order to buy an immediate status symbol. Tiffany's which reported a 54% quarter-over-quarter increase in its latest earnings report, generates over a third of its revenues from the Asia-Pacific region with much of the growth coming from China.On-line SpendingAnother key to success this season will be found in the trend towards online spending.Digital marketing research company, ComScore, Inc. recently reported that US online retail spending reached $37.5 billion for the second quarter of 2011 up 14 percent over the second quarter of last year.This increase represents the seventh consecutive quarter of positive year-over-year growth and third consecutive quarter of double-digit growth.Combining emerging markets growth and the electronic buying trend together creates an explosive mix.E-commerce sales in China almost quadrupled from 2008 to 2010 as 23 percent of its urban population shopped online last year according to the marketing survey leader, Boston Consulting Group (BCG).The firm predicts that China's Internet retailing market may overtake the US as the world's largest, with transactions forecast to be valued at more than $314 billion within the next four years.Forty-four percent of city dwellers in the world's most populous country will shop on the Internet by 2015.According to BCG, “Internet access has far outpaced the reach of the top physical retailer as China's massive geography hampers the effectiveness of physical retailing.”Consumers in China are shopping more as incomes rise.China's retail sales rose 17.2 percent in October from a year earlier and have climbed an average of 17.7 percent a month in the past two years, according to data compiled by Bloomberg. Per-capita disposable income for households in towns and cities rose 8 percent last year, almost doubling from five years ago.Playing the TrendsAt LOM our investment style has been relatively defensive in anticipation of a bumpy economic backdrop amid the broadly deleveraging global economy.Up until recently, retailers have been a relatively strong group of stocks but we see the path ahead much trickier.Until the European debt crisis sees a comprehensive rescue package, direct investment in retailers and consumer goods companies will remain very selective.Our consistent theme has been to ‘get paid while you wait' for the crisis to abate.Therefore, several higher yielding consumer companies such as Kimberly Clark (paying 4%) and McDonalds (paying 3%) make the grade as defensive dividend plays.Phone companies Verizon, AT&T and China Mobile, paying 5.5%, 6.1% and 4.2%, respectively should also hold up relatively well as children, big and small, hook up service to their new iPads, Androids and iPhone 4s under the tree this year.