by Daniel Cote

Created on: January 12, 2009   Last Updated: January 22, 2009

As is the case with every year, there are industries and companies that will underperform the market when compared to their peers. Based on the current economic environment, as well as the election of Barack Obama as president, the banking, retail, and automotive industries appear to be the most likely industries to underperform in 2009.

The banking industry as a whole struggled through most of 2008, and while some companies in this sector will do well, most will struggle once again. The lack of available credit, the increase in unemployment, and the stagnation of wages will all contribute to a lackluster year for banks. I expect regional banks like KeyCorp (NYSE: KEY) and Sun Trust Banks Inc. (NYSE: STI) to do worse than most.

KeyCorp (NYSE: KEY) primarily engages in generating deposits and originating loans, two areas that will be the hardest hit during this recession. Since people will have less money due to unemployment and wage freezes, that means they will have less money to deposit into savings accounts, checking accounts, CD's and money market accounts. KeyCorp's loan portfolio is comprised mainly of automotive, home equity, residential real estate, commercial real estate, and consumer loans. People are borrowing less money, especially for discretionary purchases like cars and housing because of the uncertainty in the economy.

Sun Trust Banks Inc. (NYSE: STI) is similar to KeyCorp in that the majority of their business is in generating deposits and originating loans. However, they do have a bigger portfolio of financial services and investment banking products than KeyCorp, but I expect them to incur the same problems as KeyCorp.

The retail industry just suffered one of the worst holiday sales seasons of all time and no one was immune to it. Even the mighty Wal-Mart (NYSE: WMT) missed their sales projections. Like the banking industry, I expect some retailers will do worse than others mostly because of what they are selling. Those retailers include teen clothing company Abercrombie and Fitch (NYSE: ANF), and specialty home improvement retailer Home Depot (NYSE: HD).

Abercrombie and Fitch (NYSE: ANF) operates as a specialty retailer of men's, women's, and kids casual apparel. There stores include Abercrombie and Fitch, Hollister, and RUEHL brands. There apparel is typically priced above that of their peers American Eagle Outfitters (NYSE: AEO) and Aeropostale Inc. (NYSE: ARO), which is likely to hurt them in this tough economy. Consumers are expected to "downgrade"

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