MARKET BEAT - Investors' 4 major concerns for 2008

This time around the backdrop favors a heavy dose of apprehension.

The economy, corporate earnings, the financial system and the presidential election all are huge question marks for 2008. You want certainty? That was last year -- or so many people thought.

Flash back to a year ago. Remember the global capital glut? Hard to believe, but the biggest "problem" Wall Street thought it faced as 2007 dawned was too much money chasing too few investment opportunities. Euphoria was boundless.

From that to a housing market crash and a fearsome credit crunch in less than 12 months.

Yet if stock investors are nervous, they haven't bailed out in droves. Hope hasn't vanished.

The average U.S. stock mutual fund is up 6.7% for the year, according to Morningstar Inc. The average foreign stock fund is up 16.3%. But note that those gains have been supported by strength in big-name stocks while many smaller stocks have fallen since midyear.

As the new year begins, here are four concerns that will dominate as investors look for clues to markets' next big move:

The economy. "Recession coming," brokerage Morgan Stanley warned clients in a recent report. "Recession averted," countered a report from Deutsche Bank Alex. Brown.

Of course, opinions on the economic outlook are rarely uniform. But this time the views are extraordinarily divergent.

One camp sees the effects of the housing crash filtering through the economy and turning the 6-year-old expansion into recession, or at best no growth.

Morgan Stanley economists said three factors would tip the balance toward recession: "Financial conditions are tighter, [economic] weakness is broadening into capital spending and global growth is slowing."

Another camp believes the U.S. will avoid recession thanks in large part to the classic remedy: lower interest rates engineered by the Federal Reserve, which has reduced its benchmark short-term rate three times since mid-September.

Further cuts by the Fed "will likely lead to acceleration in growth during the second half of 2008," said Larry Adam, investment strategist at Deutsche Bank Alex. Brown in Baltimore.

What if the recession camp has it right? The expectation would be that investors would flee many stocks in 2008 because companies' fortunes generally are tied to the economy's.