Investors this week will be taking advantage of some of the last trading days of the year to place their bets on what will be the winners of 2011.
Investors will also take in a round of economic data, including the final reading of gross domestic product for the third quarter, sales of new and previously owned homes for November and consumer sentiment in December.
Stocks that have been the best performers for the year are already seeing a pullback, suggesting that investors are locking in profits as they search for fresh opportunities.
Salesforce.com Inc., one of the best-performing stocks on the Standard & Poor's 500 index this year, slid 8.1% last week. Even so, the stock is up 85% for the year.
Netflix Inc., another investor favorite this year, has shed 12.6% since the beginning of December, though that still leaves the stock up some 226% this year.
Similarly, small- and mid-cap indexes have outpaced blue chips. The S&P MidCap 400 index and S&P SmallCap 600 index are both up more than 24% year to date compared with the S&P 500's 11.6% gain.
But with valuations on smaller companies becoming stretched, investors are likely to shift into blue-chip names next year, said Bob Gorman, chief portfolio strategist at TD Wealth Management in Toronto.
"The extent of the valuation gap would suggest to us you probably [will] start to see that rotation into bigger companies with more consistent sales, earnings and dividend growth and that are selling at lower multiples," Gorman said.
Investors will also continue to put their faith in technology shares next year on the expectation they will benefit from corporate and consumer spending as well as strong balance sheets.
The overall sector's sensitivity to the economy has made for a lackluster performance this year, with the S&P tech sector gaining 8.7%, though some of the year's best gainers were in the tech space.
Financial stocks are starting to look favorable to some.
Nicholas Colas, chief market strategist at ConvergEx Group in New York, said he likes financials as a contrarian play, noting: "They don't seem to go down very much when the bad news strikes and that's usually a sign that it's an OK contrarian investment."
Others are betting the less flashy industrials sector will hold on to its leadership position next year after gaining 22.8% so far in 2010.