BofA Merrill Lynch Global Research’s macro analysts forecast global economic growth of approximately 3.5% during 2012 and the forecast is based on the looming recession in Europe, a still-struggling US economy, high oil prices and slower growth in China.

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According to the report, it is expected that the credit and commodities will outperform equities in the first half of 2012 and recommends that investors overweight corporate and emerging market bonds.

Ethan Harris, co-head of Global Economics Research, said that the global economy can weather a normal size recession in Europe.

"The US faces its own challenges, with gradual fiscal tightening and considerable uncertainty around policy after the election. As a result, while we expect solid 3% GDP growth in the current quarter, we look for growth to slow to just 1% by the end of 2012," he added.

Michael Hartnett, chief Global Equity Strategist and chairman of the BofA Merrill Lynch Research Investment Committee (RIC), added, "Despite our short-term caution, however, we anticipate that global equities could rally by 10% next year from current levels, aided by liquidity, modest earnings growth and cheap valuations.

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"In a bullish scenario, 2012 could represent the beginning of the end of the great bear market in equities."

"Emerging markets will de-couple from the US and Europe, but the combination of lower growth in developed economies and moderately high commodity prices place emerging economies in a difficult position," added Alberto Ades, co-head of Global Economics Research and head of GEMs Fixed Income Strategy.

"The global growth malaise will mute export activity and temper demand for commodities, creating significant risks for emerging market investors in 2012."