Investors prepared to take risks - and that risk is substantial in current conditions - or prepared to take a three- to- five year investment timescale could find profitable buying opportunities in coming weeks. Deciding when to enter the market is always difficult - it is almost impossible for a retail investor to get in at the very bottom of a market. So, investors buying equities in coming weeks should be prepared for more falls before the market starts a sustained upward trend.

Most analysts see more downside in already weak markets as they continue to adjust to a changed environment. Risk on equity markets has increased substantially since September 11th. The extent of that increase now depends on how the US economy and crucially the US consumer reacts in coming months. What will unnerve markets further will be profit warnings from any of the more insulated companies such as food, drug or utilities - profit warnings from companies in the front line are now priced in.

Corporate profit warnings and the impact of big job layoff announcements on already fragile US consumer confidence will keep stock markets volatile. Concern about global recession and its possible length and depth and lack of visibility on the prospects for corporate profits are keeping most equity investors on the sidelines.

Despite efforts by central banks and regulatory authorities to restrain panic selling of shares by pumping liquidity into the markets, cutting interest rates, exhorting patriotic behaviour, relaxing rules on corporate share buybacks and vigilance on short-selling markets have fallen sharply. By close of business yesterday the London FTSE had dropped almost 12 per cent from its September 10th close, the Dow was down 14 per cent and the ISEQ was down 17 per cent.

Even before September 11th markets had been well into bear territory, reflecting increasing concern about the global economy. The US economy was already showing worrying signs of impending recession. The Federal Reserve Beige Book survey of regional economic conditions published this week showed that the economy was "sluggish" in August and early September and weaker in some areas. On September 10th the Dow was already 16 per cent off its 52 week high while the Nasdaq was down 58 per cent. The FTSE was down 23 per cent while the ISEQ was down almost 14 per cent.

The economic outlook has deteriorated dramatically, evidenced by the slew of corporate profit warnings in the past week. Already 7 of the 30 blue chip companies on the Dow Jones Industrial Average Index have reduced their third quarter earnings estimates. Negative news and uncertainty is weighing heavily on equity markets which will remain volatile until there is some closure on retaliation and some visibility on the outlook for the US and the global economies.

In a global recession investors traditionally favour defensive stocks such as food, utilities, pharmaceuticals, drinks and even tobacco. Because defensive shares were already on the rise before the attacks and have risen since, some advisers are suggesting the best profit potential now may come from careful stock picking among the sectors and shares which have been badly hit since Tuesday September 11th.But they need to be wary of companies still on very high price earnings ratios or with high debt levels.

An alternative to stock picking for investors taking a three-to -five year time frame would be to buy into a fund tracking one of the market indices which have fallen heavily such as the FTSE or the Dow. For big risk takers there is always the option of momentum investment - buying and selling quickly to take advantage of market volatility, spread betting on market trends or investing in hedge funds.

Sectors already heavily sold include airlines and aerospace, banks and insurers, hotels and leisure and luxury goods.

Airlines and Aerospace: Heavy borrowings have added the spectre of possible company failures. British Airways, Air France, KLM and US airlines have been heavily sold as well as suppliers including Boeing, Airbus, United Technologies and Rolls Royce.

Ryanair closed this week at €7.50, well off its 2001 high of €13.30 and its September 10th €10.42 close. Aviation software company Datalex closed the week in Dublin at 60 cents, less than one tenth of its €6.30 high in 2001.

Banks: Banks have dropped in anticipation of a global recession which would hit profits through higher bad debt provisions and lower revenue. Investment banks were hardest hit with trading volumes expected to be well down in coming weeks. In the US shares in Morgan Stanley, Lehman Brothers, Goldman Sachs and Charles Schwab have fallen sharply.

In the Irish market AIB was hit by exposure to the US which accounts for about 25 per cent of its business. At yesterday's €9.40 close it is well off its 2001 high of €13.80 and the September 10th close of €11.60. Bank of Ireland, with no US exposure closed at €8.07, down from its 2001 high of €12.00 and its September 10th €9.69 close.

Insurers: Always in the front line in catastrophes insurance and reinsurance shares have fallen sharply on claims costs concerns. Reinsurers such as Munich Re, Swiss re and Allianz and insurers such as CGNU, AXA, AIG were heavily sold. But some shares may have been oversold. CGNU sold its US property and casualty business last year so its exposure is limited - the shares closed at £7.32 sterling, down from a high of £11.12 sterling. Most analysts say reinsurers are well reserved to meet the cash calls and will benefit from price increases.

Hotels and Leisure: A sell-off of hotel and leisure shares has been driven by the expected sharp fall in international tourism. Three of the world's largest hotel groups have already issued profit warnings - French group Accor, US group Hilton Hotels and UK group Six Continents. In Dublin Jurys Doyle which has three hotels in the US closed this week at €6.41, down from its 2001 high of €11.10 and its September 10th close of €10.42. Gresham, the former Ryan Hotels, closed the week at 65 cents, off its 2001 high of €1.05 and its September 10th close of 85cents.

Irish Continental Group closed at €4.87, off its 2001 high of €8.30 and its September 10th close of €5.45.

Luxury Goods: Hit on recession fears LVMH is well down while Prada has delayed flotation. Waterford Wedgwood, with almost half of its sales in the US market and in the crucial run up to thanksgiving and Christmas sales closed at 55 cents, down from a 2001 high of €1.39 and a September 10th close at 98 cents.

Stocks with US exposure: CRH closed the week at €14.95, off its 2001 high of €21.50 and its September 10th €10.42 close. Smurfit hit a 2001 high of €2.46 and closed on September 10th at €2.33. This week the shares closed at €1.83.