He says that markets face a number of risks not least the imminent fiscal cliff facing the US economy.
While the prospects for earnings growth in most developed equity markets are modest, a positive case can be made for a re-rating of equities, yet this is dependent on progress being made against some powerful headwinds, says Mr Rossi.
With major government bond yields likely to stay low and below inflation, investors will continue to seek positive real returns in higher-yielding, income-generating assets and dividend-paying equities remain attractive on a total return basis.
He said: "Equity markets in 2013 are likely to be event-driven with much depending on the ability of politicians and central bankers to agree deals and make the right policy decisions.
"What is certain is that we will see a significant, synchronised expansion of central bank balance sheets throughout 2013. With central banks committed to quantitative easing policies, what was unorthodox only a few years ago has become standard practice.
"Critically, the signal to bond markets remains the same. Government bond yields are likely to remain low, with real negative yields encouraging investors to seek positive returns in short-duration, income-generating assets."
Mr Rossi added that equities could be driven higher either by earnings growth or by expansion but the outlook for earnings growth was rather subdued in the developed world, with nominal growth likely to be in low single digits.
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Among his other key assessments:
• Equity valuations are reasonable relative to history with P/E ratios of around 13-14 times trailing 12-month earnings.
• We have seen sustained outflows from equities in the last few years, so much so that institutional levels of equity ownership are now at 30-year lows. Equities are an unloved asset class and there is growing scope for a reversal of this trend.
• Volatility has subsided.
He believes the main three key risks facing equity markets in 2013:
• Lack of a resolution to the US 'fiscal cliff' which could throw the US and global economy into recession.
• The economic, sovereign and banking crisis in Europe remains unresolved despite central bank promises having had a favourable impact.
• Geopolitics, particularly in the Middle East, could pose a significant and unpredictable risk in 2013.
He believes that in the light of all these challenges and with government bonds failing to provide a store of value after inflation, investors will continue to search for yield, particularly in short duration assets. In this respect, equity income remains an attractive story given the dividend yields available on equities compared to government bonds, he said.
He added: "In terms of sectors, I think selected healthcare, technology and consumer stocks remain attractive. Regionally, emerging markets are relatively attractive given their better growth rates and the fact that capital is likely to flow to investments in higher-yielding currencies. The Chinese economy is well placed to have a rebound in 2013.
"In developed markets, the US looks attractive if the fiscal cliff can be successfully navigated. The housing market is recovering, which is a key bellwether for the broader economy, and consumer confidence is also picking up. In energy, the US could become the largest producer of both gas and oil thanks to the exploitation of its shale reserves."