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Investors have plenty to worry ?about as the calendar turns to 2013, but that shouldn't stop the stock market from continuing its four-year climb upward.

Despite skyrocketing federal budget deficits and the potential for tax increases and spending cuts that come with attempts to reduce those shortfalls, along with ongoing fiscal woes in Europe, a panel of local investment advisers still expects the stock market to turn in above-average gains during 2013.

While many think the next 12 months will have plenty of ups and downs, they still predict that the market will finish 2013 with gains that average roughly 10 percent for the Dow Jones industrial average and 9 percent for the Nasdaq Composite index.

Despite the looming fiscal cliff, the panel believes that the economic backdrop for stocks should be fairly good. Economic growth is expected to be moderate, corporate profits should grow solidly, interest rates will remain near historic lows and the battered housing markets should build on the recovery that began to gain steam last year.

"I am really looking forward to 2013," said David Hartzell, the president of Cornell Capital Management, a Clarence money management firm, who thinks next year will look like "2012 on steroids." That optimism makes Hartzell the overall most bullish member of the investment panel, forecasting a 12.4 percent jump by the Dow and a 21.5 percent surge by the Nasdaq.

But the advisers think there will be plenty of bumps along the way. From the continued financial turmoil in Europe to the skyrocketing budget deficits in the United States and continued international tension in the Middle East, there are plenty on simmering issues that could boil over during 2013 and roil the stock market.

"Hope for the best, but plan for the worst," said Gerald T. Cole, the managing director at Arbor Capital Management in Amherst, who expects the Dow to gain 10 percent this year and the Nasdaq to rise by 12 percent.

"The bad news is: The U.S. economy is in a weakened shape," he said. "The good news is: We have a lot of company. This means that funds will still seek refuge in the U.S. as a safe haven. But it is slim pickings just the same.

"It's safe to say that 2013 will be another volatile year," said Thomas R. Emmerling, the managing partner at Dopkins Wealth Management in Williamsville, who predicts that the Dow will rise by 7 percent and the Nasdaq will gain 8 percent.

"An event, or one bad policy decision could throw the markets into turmoil," Emmerling warned. "What's important to remember is that most returns, in any year, are determined by surprises meaning unforecastable events."

Yet Bruce Kaz, the president of Courier Capital Corp, a Buffalo investment firm, said investors shouldn't be cowed by uncertainty. He thinks many of the issues now worrying investors will be resolved in their favor.

"The choice remains: facts or fear," said Kaz, whose forecast for a nearly 16 percent jump by the Dow is the most bullish among the panel of advisers, although while his forecast for a roughly 5 percent gain by the Nasdaq is the most bearish.

Kaz notes that investors have had plenty to worry about over the last three years, but that hasn't stopped the Dow from posting gains of between 5.5 percent and nearly 19 percent every year since 2008. "Being timid will likely again prove to be costly," he said.

Hartzell, among the most bullish, thinks the Federal Reserve's commitment to keep interest rates near their current historic lows will be a strong catalyst for the stock market.

"The sole reason for the rip-roaring market of 2013 is the Fed's decision to keep interest rates abnormally low, driving every spare penny that every investor owns into the stock market."

And investors have plenty of spare pennies, which are collecting paltry amounts of interest thanks to the Fed's ultra-low-rate policies. Investors have $2.6 trillion parked in low-yielding money market funds, according to the Investment Company Institute. U.S. nonfinancial companies have almost $1.7 trillion in cash, according to the Fed.

"Once individuals and companies decide to invest this capital, it could have a significant impact on the global economy," said Cynthia E. Vance, a certified financial planner at Jensen, Marks, Langer & Vance, a Buffalo money management firm, who expects the Dow to rise by 11 percent and the Nasdaq to gain 13 percent.

The strengthening housing market also could give a boost to U.S. consumers and the economy, said Anthony J. Ogorek, who runs Ogorek Wealth Management in Amherst .

Ogorek, who expects the Dow to rise by 10 percent and the Nasdaq to go up by 8 percent, thinks the housing rebound could be even stronger than many experts expect in 2013.

That will build upon what he already expects will be continued earnings growth and productivity improvements from the money-saving investments in efficiency upgrades that companies have made since the Great Recession hit more than five years ago, he said.

Europe's long-simmering fiscal crisis will continue to be a concern, but Tim Johnston, the managing partner at Sandhill Investment Management in Buffalo, is encouraged by the progress that's been made in defusing the situation.

"I think Europe continues to work through the structural changes they need to be solvent," said Johnston, who expects both the Dow and Nasdaq to rise by 10 percent next year. "I think they're halfway there. That's good."

The Chinese economy, which has slowed from its breakneck growth, also is expected to rebound, which should spur growth in global markets. "China looks like its bottoming out, and that's a good thing," said Ronald M. Roche, vice president at Robshaw & Julian Associates, an Amherst money management firm.

Back home, though, Roche isn't expecting the economy to go gang-busters next year. He expects profit growth about on par with this year and subdued increases in corporate revenue. And that, he thinks, could disappoint many investors who are expecting more robust growth and have been willing to support higher valuations on stocks in anticipation of that growth.

"We're looking at a market that's already been paid for a recovery that hasn't happened yet," said Roche, whose forecasts for a nearly 6 percent rise in the Dow and an almost 9 percent gain by the Nasdaq are the most bearish of the investor panel.

Johnston also worries about the long-term impact of snowballing budget deficits.

"I think we're going to have higher taxes in one form or another, and that inhibits capital formation," he said. "We have massive budget deficits. There's no way we can't have higher taxes."

Ogorek said dealing with the massive budget deficits likely will go beyond dealing with the fiscal cliff. "Short-term patches to avoid the fiscal cliff may precede more comprehensive tax and entitlement reform in 2013 and 2014," he said.

Of course, making predictions is a risky proposition, and Emmerling said the wisest investors should pay little heed to what forecasters say.

"The reason is that there's no evidence that there are any good forecasters," he said. "No one knows where the market will end up in 2013. And one should not base their investment decisions on such forecasts."

Instead, Emmerling recommends that investors try to manage the risk in their portfolios by broadly diversifying their holdings and take a passive approach to managing their portfolio through the use of lower-cost index funds.

"The winning strategy is to instead focus on what you can control the amount of risk you take, diversifying those risks as much as possible, [reducing investment] costs and tax efficiency," he said. "If you do that, your odds of investment success go way up."

email: drobinson@buffnews.com