That the choice of stock market sector is critical to investment returns will come as no surprise to anyone who backed London-listed banks last year (down 20 per cent) as opposed to basic resources (up a hefty 45 per cent).

What is more striking is that discrimination between sectors appears to be becoming more important, rather than less. Research by Citigroup finds that, out of a total of 18 pan-European industry groupings, nine outperformed or underperformed the wider stock market by 10 per cent or more in 2007, a threefold increase on their number in 2005. That may be less than in 1999, the peak of the dot-com boom, when no fewer than 15 sectors diverged strongly from the market, but the recent trend is clear.

The bank reaches much the same conclusion having crunched its numbers another way: calculating the relative returns from investing in the top three best-performing pan-European sectors last year (basic resources, automobiles and parts, and chemicals) minus the three worst performers (banks, insurance and travel and leisure). On that basis, the return differential between the haves and the have-nots has widened from 20 per cent three years ago to 40 per cent now.

Why? Looking back at history, Citigroup suggests that such widening tends to coincide with turning points, actual and perceived, in macroeconomic conditions: in this case, the risk of a recession in America.

Especially interesting is the investment bank’s discovery that the gap in valuations between different sectors, as measured by price-earnings ratios, has remained remarkably constant over what has been a four-year bull run in stock markets. It is not that banks have become cheaper relative to miners, for example, or chemicals more expensive relative to leisure stocks. Rather, the difference in sector performance has been driven by a straightforward change in earnings growth expectations – such that miners are enjoying the strongest rise in forecast profits and banks the biggest fall. In that light, the stock market appears to be functioning with perfect efficiency.

So what might all this arcane computation tell investors about where to put their money in 2008? In short, it would appear to vindicate a strategy of backing those sectors where projected increases in earnings are the strongest, as opposed to those where the price-earnings ratios are the lowest – or, to put it in the lexicon of City fund managers, to chase growth in preference to value. Taking the categorisations used by the Dow Jones Stoxx indices, growth investing outperformed value investing in Europe last year by 6 per cent, the first time that the former approach has beaten the latter since 1999.

All of this may be eerily familiar to anyone astute enough to have backed technology, media and telecoms stocks at the end of the last decade: at that time, those three sectors and growth were virtually synonymous. But as far as the stock market was concerned last year, growth found a different form: exposure to emerging markets, principally those of India and China. Backing the sectors whose fortunes are most closely tied to those territories would have led you into miners, food and beverages, personal and household goods, and chemicals, all of which would have been profitable strategies. The exception was technology, which underperformed for the fourth year in a row.

Conversely, avoiding the two sectors least exposed to emerging markets – travel and leisure, and financial services – would also have served you well. Only in the cases of utilities, which tend to be focused almost exclusively on their domestic and neigbouring markets, and, to a lesser extent, construction would that approach not have worked. Utilities outperformed the wider market by an impressive 16 per cent.

This year the prospect of moderating economic growth and the reduced availability of credit causes Citigroup to supplement its preference for emerging-market-exposed sectors with two others: a partiality for large-cap stocks and those with strong balance sheets. That means food and beverages, despite the fact that the sector currently trades at a 40 per cent premium to the wider stock market. Among the London-listed constituents, it likes Unilever over Associated British Foods and Diageo. It also means oil and gas, which Citigroup contends has historically been one of the biggest beneficiaries of cuts in US interest rates. It steers investors towards Tullow Oil ahead of BG Group. Finally, it has turned positive on technology stocks, where earnings growth is set to accelerate this year – to 30 per cent, against 4 per cent last year, on its estimates. However, the big names – Infineon, Nokia and SAP – are listed overseas.

If Citigroup is to be believed, the stock market’s likely favouring of emerging markets, financial strength and large caps should mean that underperforming sectors such as retail, travel and leisure, financial services and media will continue to remain firmly out of favour. In that sense, at least, 2008 may turn out be little different from 2007.

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