As the year comes to an end, investors all hope that sustained economic recovery lies ahead in 2010. For most individual investors, 2009 was a year of uncertainty - a year in which many sat on the sidelines and hoped for some clarity and direction from Wall Street's whiz kids. However, we continue to try navigating in unchartered waters. The economy's woes are unlike previous downturns, and recovery is not likely to follow traditional patterns.

The economic stimulus measures - tax cuts and the Cash for Clunkers program, for example - have helped bolster the economy and fuel the stock market's recovery. Although they are below the peak value they logged in 2007, stocks have rebounded and are no longer cheap. With this in mind, economists suggest that if stocks are to continue to make gains, U.S. companies must start to post some real earnings growth. This will be a challenge for many companies because bad assets and a crippling amount of debt on corporate balance sheets will continue to deter lending. The credit squeeze affects everyone, but the small business sector has been particularly hard hit. This means we can expect continuing gains in the market, but any gains will most likely be at more modest levels. This year's rally was the largest since the 1930s, and few investment analysts expect that to be repeated in the coming year. Some analysts are expecting lackluster performance to persist for as long as the next decade.

Slower growth
Many experts believe the economic recovery will continue at a slower pace than the nation's long-term historic average of 3 percent. They predict gross domestic product growth in 2010 could be 2 percent or less (estimates range from 1.7 to 2.5 percent).

In case we are too quick to forget the lessons of the recent recession, bad news - this time from Dubai where Middle Eastern developers are struggling to meet repayments to European banks on some $59 billion in debt - reminds us that the massive global de-leveraging that began here last year has not been fully worked out. The impact of this latest financial shortfall caused an immediate dip in U.S. financial indices at the end of November - reminding us yet again how interdependent our respective economies are.

So where does this leave the individual investor? Practically all financial analysts agree that inactivity, which might have worked in 2009, won't work in the upcoming year. They urge investors to meet with their tax and financial advisors to rebalance their individual portfolios. Those who sat on the sidelines in 2009 are almost certain to discover that the economy's recovery and the stock market rally have thrown their mix of financial instruments out of whack.