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Morgan Stanley

The worst-case scenario sees the United States going over the fiscal cliff — a combination of tax hikes and spending cuts kicking in at the same time next year — and the European Central Bank deciding not to cut interest rates or roll out its bond-buying program, which would lower borrowing costs and ease credit conditions in countries such as Spain.

Investors, meanwhile, need to stay on their toes.

“Importantly, investors should keep an open mind and be prepared to switch between the scenarios as policy developments unfold,” Morgan Stanley economists concluded.

On the flip side, however, the global economy could grow 4 percent next year if policymakers around the world take action, outpacing this year’s project growth rate of 3.1 percent, the bank’s economists added.

Other noted economists worry 2013 could be a bumpy year as well.

Marc Faber

“I don’t think markets are going down because of Greece, I don’t think markets are going down because of the ‘fiscal cliff’ — because there won’t be a ‘fiscal cliff,’ ” Faber told CNBC’s “Squawk Box.” “The market is going down because corporate profits will begin to disappoint, the global economy will hardly grow next year or even contract, and that is the reason why stocks, from the highs of September of 1,470 on the S&P, will drop at least 20 percent, in my view.”

“In the Western world, including Japan, the problem we have is one of too much debt and that debt now will have to be somewhere, somehow repaid or it will slow down economic growth,” Faber said. “I think we lived beyond our means from 1980 to 2007, and now it’s payback period.” said Marc Faber.

“I think the whole global financial system will have to be reset and it won’t be reset by central bankers but by imploding markets — either the currency [markets, debt market or stock markets,” he said. “It will happen — it will happen one day and then we’ll be lucky if we still have 50 percent of the asset values that we have today.”

Shayne Heffernan

“my greatest concern regarding the markets is not the recession, is it that Europe, USA and Japan may print so much money that many people will lose real wealth while they are make more money.” said Economist Shayne Heffernan.

Mobility and a long term outlook are essential when managing your portfolio now. The ability to select the best quality long term investments from the traditional and emerging markets has never been so important. For hedging mobility is key, the ability to access Foreign Exchange, Commodities and Futures to balance your risk is a new fundamental asset for investors, this will be the cornerstone of successful investing in a society where money is printed so easily.

Cash is no longer king and the value of the USD, Euro and Yen along with most currencies is being eroded which means everyone must rethink their investment strategy and adjust their portfolio holdings.

“While many think that if they live in the USA and earn in USD nothing will change, I can assure you that those days are over, growing world wide demand for food, energy, goods and services has an impact at all retail outlets in the USA.” he added

Every investor, institutional or individual must now balance their portfolio based on currency exposure.

The IMF’s John Lipsky has warned that “the average public debt ratio of advanced countries will exceed 100 percent of their GDP for the first time since the war” by the end of this year, and that this debt is unsustainable, risking a new fiscal crisis for some, that time is now upon us and investors need to be prepared.”

OECD

Global growth is set for a sharp slowdown and the eurozone debt crisis “remains the greatest threat to the world economy at present,” the OECD warned on Tuesday.

The OECD said in its latest Economic Outlook, drafted before the eurozone and IMF unblocked almost 44 billion euros (HK$220 billion) in emergency loans for Greece: “A hesitant and uneven recovery is projected over the next two years.”

The outlook downgraded the outlook for global growth next year to 1.4 percent from 2.2 percent expected previously.

Another threat to business activity worldwide is a potentially catastrophic budget standoff in the United States, where automatic tax increases and spending cuts are to take effect in January unless there is a compromise solution between Democrat and Republican lawmakers.

The Organisation for Economic Cooperation and Development downgraded its growth estimates for this year and next for the United States and Japan, and its data showed that the eurozone recession could be deeper than last forecast in May.

The 17-nation bloc is “projected to remain in or near recession until well into 2013,” the report said.

Overall the 34-member organisation’s economies are expected to expand by 1.4 percent in 2012 and 2013, and then pick up to a pace of 2.3 percent in 2014.

Unemployment is forecast to rise from 8.0 percent this year to 8.2 percent in 2013 before easing back to 8.0 percent in 2014.

Inflation should decline meanwhile, from 2.1 percent in 2012, to 1.7 percent next year, and then edge up to 1.9 percent in 2014.

“Economic prospects are very uncertain and highly dependent on the risks associated with the nature and timing of policy decisions related to the euro area crisis, (and) the US fiscal cliff,” OECD analysts said.