By Peter Switzer, Switzer Super Report

Here's what I expect to happen to stocks and the global economy as we head into the New Year, and I've thrown in a couple of stock tips as well. My predictions for the end of 2012 and the New Year.

As both the fiscal cliff and Christmas loom, I'd like to outline what I expect to happen as we head into year's end and then take a stab at 2013 for stocks. And I will throw in few stocks that a guy I respect is investing in right now.

Here's what I think will happen.

The fiscal cliff negotiations will send stocks up and down over the next two weeks, but before Christmas, there will be a settlement. This will lead to a rally that will spill over into January, which is good for stocks, and then sometime between March and May the market will have to work out whether this will be a "sell in May and go away" year.

History tells us that the first two years of a presidential cycle are the worst for stocks, but then spending increases in year three, often helped by the US Federal Reserve, and then year four is good for share prices as the November election bears down.

Will history repeat?

This year, the S&P 500 is up about 11% and the last two years have followed the historical script. Of course, history doesn't repeat like clockwork but has tendencies that give light to patterns ? however, there are always out-years or out-cycles that can happen.

I think we are in an out-cycle because of the weirdness of the global economy in a post-GFC world. The US government can't play hard ball like other governments in the past or else it will cruel the creeping recovery, so I think stocks will go up this year.

Have a look at these 2013 forecasts for the S&P 500, which is now at 1,408. Bank of America Merrill Lynch has it at 1,600, Deutsche Bank tips 1,500, S&P/IQ comes in at 1,550 and Canaccord Genuity has the highest at 1,650.

If the latter is right, the index will spike some 17% next year and even if we take the average of the four forecasts, then we get 1,575 and so the average rise would be 11.86%.

Locally, one of the country's best fund managers, Geoff Wilson of Wilson Asset Management also acknowledges the two bad years scenario in the US election cycle, but he thinks it will be an out-year. In addition, he thinks we will outperform with interest rate cuts crucial to turning businesses around.

Wilson admits to buying some big retailers on the strength of reconnaissance from retail businesses his institution surveys, though he admits it could be a short-term play. He reminds us that there is a record $1.6 trillion in deposits in financial institutions and some of this will eventually head back to stocks as rates fall.

What Wilson is buying

His improving economic outlook means he has bought CSR ((CSR)) and Brickworks ((BKW)). In terms of the typical small caps, he chases the likes Cash Converters ((CCV)), Energy Action ((EAX)) and NextDC ((NXT)), which is seen as a takeover target.

"All the dynamics are perfect for the market to be stronger over the next six-12 months," he said.

He worries about international curve balls such as a revolution in Greece, which could ruin his optimistic view, but that says he is heavily into stocks and that's the kind of news I like to hear.

My story

Undoubtedly, there will be challenges next year, but I think improving economies ? the USA, China and the Association of South-East Asian Nations (ASEAN) region ? will offset the negative, which is Europe.

And if we can see some rate cuts at home create a lower Aussie dollar, then we could easily outperform Wall Street over 2013. That's my story and I am sticking to it.