By John Wasik

CHICAGO, Dec 31 (Reuters) - At this point, most investors

are peering over the fiscal cliff and feeling like Jimmy Stewart

in the classic Hitchcock film 'Vertigo.' But if you look beyond

the precipice, there is some solid ground.

For one thing, the U.S. housing market will be better than

most people expect, which bodes well for patient investors

holding onto consumer-sector stocks. Most economists are not

predicting any startling jump in home sales or prices next year,

and they largely have not forecast how a housing rebound will

spill over into the wealth effect of increasing consumer

spending and job creation.

Home foreclosures in November hit their lowest rate in six

years, a trend that is likely to continue, according to

RealtyTrac, an online marketplace of foreclosure properties.

If the Obama administration can come up with a plan to stem

foreclosures or accelerate turnover of unoccupied properties,

that would reduce overall home inventories and boost sales and

prices.

Such a plan would also spur sales of appliances, vehicles

and other consumer durable and discretionary goods and services.

To make the most of this opportunity, consider the iShares Dow

Jones Consumer Services ETF or the Industrial Select

Sector SPDR.

This is just one example of how an investor could play the

wild cards in the economic forecast for 2013. There are still

plenty of buying opportunities, even in the face of uncertainty.

Generally, most middle-of-the-road forecasts are calling for

sluggish U.S. growth this coming year. A widely followed survey

by the National Association of Business Economists shows

expectations for about 2 percent growth in U.S. gross domestic

product, which is roughly what they predicted for 2012.

Accompanying that growth is a slow resolution of the

residential housing downturn, increased consumer consumption and

an improving job market, which will result in an average 7.7

percent jobless rate, the survey shows. While other economists

are giving similarly uninspiring forecasts, there are some more

compelling things that could develop.

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You have to get away from a lackluster U.S.-centric

perspective to understand that international stocks are still

going to reflect rising GDP in developing countries. According

to RBC Wealth Management's 2013 outlook, a real global growth

rate of 3.5 percent equates with stock returns of 5 percent to

10 percent.

While the U.S. Standard & Poor's 500

price-to-earnings ratio is near its long-term average, similar

measures in some European and Asian markets are well below

average, according to RBC. Growth will continue in China (8

percent), India (6 percent), Brazil (3.5 percent) and Indonesia

(3 percent).

If international investors are largely finished with

retreating to bonds as safe havens during the prolonged euro

zone crisis, that would trigger a buying spree in stocks. In

that case, you would want to have exchange-traded funds such as

the Vanguard Total Stock Market ETF or the iShares Core

MSCI Total International Stock ETF.

There are still opportunities in bonds, though.

The general warning has been out there for years: Shorten

your bond-fund maturities because interest rates will eventually

rise and bonds will be sold off. That still holds, but you can

find higher yields through bank loans, emerging markets and

municipal bonds, Mike Gitlin, director of fixed income for T.

Rowe Price, said in a recent 2013 outlook.

Funds like the Fidelity Floating Rate High Income Fund invest in floating-rate bank loans. The iShares JP

Morgan US Dollar Emerging Markets bond ETF holds an

index representing bonds from developing countries. And the SPDR

Nuveen Barclays Capital Muni Bond ETF invests in an

index of U.S. municipal bonds generally rated 'AA' or better.

What would derail my wild cards? The usual worries about

European fiscal resolution, budget and debt-ceiling battles in

Washington, and growth in China. There also will be blips along

the way as market volatility continues unabated.

A key component of my wild-card strategy is investing in

sectors or regions when they are cheap and undesirable. If you

feel especially brave, you can buy big-company European Union

stocks through a fund like the Vanguard MSCI Europe ETF .

Certainly long-term investors who are not retiring soon

should consider holding at least 40 percent of the stock portion

of their portfolios in non-U.S. shares.

(Editing by Beth Pinsker and Lisa Von Ahn)

((beth.pinsker@thomsonreuters.com)(1 646 223 7289)(Reuters

Messaging: beth.pinsker.thomsonreuters.com@reuters.net))

(Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance )

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