With stock market indices pushing new highs, the investment community has become somewhat divided over exactly where we go from here. For one thing, what makes this bull market rather different from those of past eras is the sheer breadth of the rise which has included participation by all of the ten major industry sectors and most of the important geographic regions around the globe.The MSCI World Stock Index which includes a healthy representation of the world’s major bourses has more than doubled since reaching a low in March of 2009.Given the length and breadth of the current rally, equity investors who wish to stay in the game may wish to consider becoming more selective.In my experience, investors who take a longer term approach tend to be more successful, therefore I recommend focusing on those investment themes which are likely to endure.With respect to 2013 and beyond, several important trends are apparent:Moderate global growth led by a three-pointed US economic recoveryLeading economists believe the US will grow at a faster pace than Europe and Japan over the next few years, even though they do not expect the world’s largest economy to catch up to its historical averages. For example, this year the American economy has proven to be surprisingly resilient despite the headwind of the country’s two percent payroll tax hike.American housing, retail sales and manufacturing are all ticking up nicely in recent months while the US-based S&P 500 stock index has increased over nine percent so far this year leading almost all of the other major stock exchanges around the globe.Importantly, America’s housing market has been consistently rebounding as foreclosures and unsold home inventories are soaked up by buyers finding bargains and financing them at historically low mortgage interest rates. If the present trend continues, we believe the US financial system should stabilise further, homeowners will continue to feel better about spending a larger portion of their incomes and up to three million new jobs may be added in sectors such as construction, according to industry analysts.In addition to the US housing market recovery, new energy discoveries across North America are proving to be a game changer. Last year’s report by the International Energy Agency (IAE) declared “The recent rebound in US oil and gas production ... is spurring economic activity with less expensive gas and electricity prices giving industry a competitive edge and steadily changing the role of North America in global energy trade.”The report concluded that by around 2020, the United States will become the largest global oil producer overtaking Saudi Arabia.An added benefit to cheaper and more accessible energy resources is a boost in domestic manufacturing. New finds have already dropped America’s price per unit of energy to less than a third of Asia’s. Lower energy costs, combined with rising labour costs in China have created what might be the beginning of an American industrial renaissance with companies from Ford Motor Company to Michelin moving production back to the States creating more jobs and a larger tax base.Companies looking to deploy cash hoardsSince the beginning of the Great Recession, companies have been hoarding cash earned by operating at record high profit margins as they aggressively reduced costs and held back on investing during the uncertain times. This phenomenon has resulted in extraordinarily high cash balances at major companies.As well, record low interest rates have motivated many companies to issue debt at presently ultra-low interest rates, making funds available for buying other companies, undertaking capital investments and increasing stock dividends. Overall, corporate America has increased its cash piles every year since 2007. By the end of last year, US non-financial companies filled their coffers with an additional $130 billion, taking the total cash to a record $1.45 trillion.Major themes for the years ahead will revolve around how exactly companies deploy their cash stash. Already merger and acquisition activity has begun to accelerate.Companies including ketchup maker Heinz Corporation and Dell Computer have been taken over or are in the midst of buyout negotiations this year. In addition to those companies isolated as targets, other beneficiaries are likely to be the large investment banks paid handsomely to construct the deals.Of course, dividend increases have been a prevailing theme and likely to continue their role in supporting key market sectors.Government austerity and deleveragingOn the liability side of the balance sheet are most of the world’s largest governments which have gone to excess in leveraging up their own balance sheets in an effort to stabilise the global financial system and keep the nascent economic recovery on track. The Federal Reserve, for example has more than tripled the size of its balance sheet since 2008 and the majority of the OECD countries are still running massive deficits and operating at historically high debt/GDP ratios.What to look for with this trend is ongoing sluggish growth in the developed world as governments push for more tax revenue and try to cut expenses. Growth in the aggregate will be pressured, but an even greater slowdown will likely occur in those industries which depend more directly upon government spending such as the military defence industry.Fixed income markets may actually find some encouragement from the deleveraging headwind as over indebted governments find it increasingly difficult to raise interest rates. Realistically, higher sovereign borrowing rates would materially spike most government interest expense line items.Notwithstanding the ongoing low rate environment a positively sloped yield curve should continue to provide further opportunity for bond investors who can ‘ride down the yield curve’ and profit from well-positioned fixed income portfolios.Rising emerging market middle classOver the next half century, OECD economists predict the global economy will grow at around three percent annually, mainly driven by productivity improvements and build up in human capital as emerging economies embrace available technology. The developed world is expected to grow about two percent annually with declining growth rates in regions such as Europe which remain structurally uncompetitive. Overall, economists believe that emerging economies, propelled by a rising middle class sector will progressively account for a larger share of global output.The rise in emerging equity markets, while more pronounced since the equity markets bottomed in 2009 has recently become more choppy and uneven.For example, a broad index of Chinese stocks is down more than three percent this year while Turkey’s stock market has risen more than seven percent. Nevertheless, we believe developing countries are coming off very low per capita wage bases compared to the developed world and therefore have plenty of room to catch up.A growing emerging market middle class sector offers profit potential from direct participation in select equity and fixed income markets. This emerging consumer group is spending money on autos, home furnishings, travel, electronics and dining out tilted towards strong and recognisable global brands. In addition to direct emerging market investment, OECD-based multinational companies adept at serving the developing world should continue to prosper. In the bond market, fixed income securities issued from newly industrialised countries such as South Korea have already been seeing higher bids relative to other bonds lately with some credits even being upgraded by the major rating agencies.Bryan Dooley, CFA is a senior fund manager at LOM Asset Management Ltd in Bermuda. Please contact LOM at 441-292-5000 for further information.This communication is for information purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. Readers should consult with their Brokers if such information and or opinions would be in their best interest when making investment decisions. LOM is licensed to conduct investment business by the Bermuda Monetary Authority.