The US and Europe will be in recession for most of this year, and stocks may hit fresh lows in the first half of the year, analysts at ING said.

But the analysts, who raised the insurance and bank sectors to "neutral" from "underweight," said equities are expected to gain 70 per cent from the second half of this year through the end of next year.

They downgraded the oil & gas sector to "underweight" from "neutral" to reflect the group's inverse correlation with financials.

The analysts prefer the retail and media sectors as earnings are expected to pick up next year, the healthcare sector since it is unaffected by the recession, and the utilities and telecom sector, which presents a high dividend yield. The brokerage has an "overweight rating on all these sectors.

"We think the dominant theme (this year) will be financial health... For every bankruptcy there is also a survivor that gains market share and becomes more valuable," analysts at the brokerage wrote in a Western Europe Equity Strategy note.

They also expect a pickup in mergers and acquisitions, while the euro's year-end rally is expected to gradually decline and the US dollar is forecast to be strong.