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Happy trader on the New York Stock Exchange

The Bank of Nova Scotia says investors should position themselves for a modest rise in stock prices next year, based on its view that the world economy is likely to continue to chug along at a steady, if unspectacular clip during 2013.

In its annual forecast for next year, the bank's strategists figure that in a modest growth environment stocks will perform better than bonds, but they're betting that conditions won't be buoyant enough globally to significantly lift commodities.

"Our game plan for 2013 is to be positioned for pro-growth conditions (equities over bonds; cyclicals over defensives) in the first half," says Vincent Delisle, an investment strategist at the bank, in a note to clients.

Scotiabank is one of the first of the major investment firms to issue its outlook, and it's forecasting that the TSX will reach a peak of 12,800, up about 5 per cent from current levels, while the S&P 500 may rise nearly 10 per cent to 1,550.

The big reason for the U.S. outperformance: the housing market in the United States is starting to rebound, while commodities are likely to show only "tepid" gains.

"Attractive affordability and low inventories point to a sustained recovery in U.S. housing activity in 2013, a development that could solidify 'Main Street' confidence. A pick-up in housing data (starts, sales, prices) could represent the biggest threat to the bond bull market. Home builders and lumber companies should perform well," he says.

Meanwhile, in Canada the "housing sector is going the wrong way." Although the risk of a housing collapse remains a "low probability scenario in our opinion," weakness in the sector will weigh on growth by depressing consumer spending and lead to the second year in a row where the economic growth rate in the U.S. exceeds that of Canada.

Commodities will be supported by a modest pick up in demand from China, but muted European economic activity is likely to keep the upturn in the Asian powerhouse below the 9 per cent threshold that would lead to sharp gains in raw material prices.

In Europe, Mr. Delisle says growth will be constrained at least through the middle of the decade because of the sovereign debt crisis. Southern Europe will remain mired in recession next year, France will struggle to grow, while both Germany and the UK will only manage 1 per cent GDP growth.

Mr. Delisle has one stock tip that investors can use to guide their actions during the year, and it's been something he's been using since 2009. "In our opinion, monitoring the trend in weekly jobless claims helps filter the background noise. As long as U.S. employment conditions improve, we will maintain a constructive S&P 500 bias and stand ready to buy the dips."