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The way Morgan Stanley chief investment officer Michael Wilson describes it, investors in 2023 will feel like they’re treading water in a sea of sharks, with significant returns available to the nimble.

Mr. Wilson has been among the most accurate market forecasters in recent quarters. Recently, he accomplished the feat I value most in strategists – successfully predicting a market turn.

In November 2021, the strategist correctly predicted weak and volatile equity markets. In mid-October of this year, Mr. Wilson went tactically bullish just ahead of the S&P 500′s 9.4 per cent rally. All market pundits will be right eventually by always being bullish or bearish, but this is an example of the most valuable analysis – it uncovers when to switch between the two.

The treading water part of my metaphor refers to Mr. Wilson’s forecast that the S&P 500 will finish 2023 near 3900, only about 1 per cent away from current levels. The strategist, however, also believes that the market path for the year will be extremely volatile, with a major bust before a boom. That’s where the sharks lie.

“Our highest conviction view across the board is that 2023 bottom up consensus earnings are materially too high,” he wrote in a note this week. “On that score, we revise our 2023 EPS forecast another 8 per cent lower.” The market’s realization that profit growth will be much slower than expected will send the S&P 500 much lower – between 16 and 24 per cent from current levels by Morgan Stanley’s estimation - before recovering by year end.

If Mr. Wilson is right, 2023 could turn out to be a lucrative year for investors able to keep their cool during an early-year sell-off. Adding risk assets as forward earnings assumptions decline would allow for outsized returns in the latter half of the year.

-- Scott Barlow, Globe and Mail market strategist

Also see: Political gridlock may help U.S. stocks but inflation still in driver’s seat

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Stocks to ponder

MTY Food Group Inc. (MTY-T) The share price on the Montreal-based restaurant brand owner has been stuck between $45 and $60 over most of the past five years, giving loyal investors little to celebrate. Will pretzels power the shares to new heights? David Berman explains why its recent purchase of Wetzel’s Pretzels just might.

The Rundown

What the Algonquin Power debacle says about dividend stocks versus GICs

Has dividend investing met its match in the 5-per-cent GIC? Rates of 5 per cent and even a bit better are available on guaranteed investment certificates from a wide variety of alternative banks and credit unions. Given that both banks and credit unions have deposit insurance plans, there is virtually no risk of losing money in a GIC. The same can’t be said about a dividend stock offering a similar kind of yield. Rob Carrick has some thoughts on weighing the two options.

Why Canadian energy investors shouldn’t fret about Ottawa’s new tax on stock buybacks

Earlier this month, the federal Liberals announced a plan to impose a 2-per-cent tax on companies buying back their own stock. The oil and gas sector has been at the heart of the buyback spree. Elevated energy prices amid the war in Ukraine has led to towering profits that have largely been funnelled back to shareholders. Should investors in the oil patch be concerned? Tim Shufelt takes a look.

Canada plans to bring an end to an inflation hedge tool. Here are some alternatives investors can turn to

The federal government earlier this month announced it would cease issuing real return bonds, a product that’s been in existence since 1991. The decision has sparked pushback from fixed-income market participants, but for most investors, the termination of the program shouldn’t be a big loss. Fixed income specialist Tom Czitron explains.

U.S. IPO price pops prompt fraud and ‘pig butchering’ warnings

U.S. exchanges and Wall Street’s top cop are warning about a heightened threat of fraud mostly involving the initial public offerings of small companies, driven in part by a social media-driven pump-and-dump scheme called “pig butchering.” As Reuters reports, some investors harmed by the pump-and-dump schemes appear to be victims of an evolving social media scam called “pig butchering.”

Bruised UK assets get little respite from grim outlook in Hunt’s budget

Finance minister Jeremy Hunt has gone some way towards restoring Britain’s market credibility with a predictable budget, but the economy’s bleak outlook is likely to keep UK assets at the bottom of investors’ lists.

Others (for subscribers)

The highest-yielding stocks on the TSX, plus risk data

Number Cruncher: 10 U.S. semiconductor stocks offering value and momentum

Number Cruncher: Eight equity ETFs that offer quality and low-volatility

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

Globe Advisor

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Black Friday test and other world market themes for the week ahead

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Compiled by Globe Investor Staff