Editor's note: This story was originally written going into 2023 and has been added to our CNBC Pro white paper vault. Maybe the best economic news for 2023 is that everyone thinks there's going to be a recession. At worst, the plethora of recession predictions means businesses and investors alike have plenty of time to prepare for a downturn. Proprietors can belt-tighten and adjust inventory to address waning demand, while market participants can get defensive and protect capital. At best, however, the concentration of opinion around the near certainty of a contraction could set up a contrarian scenario: You never see the black swan coming, do you? With so much attention focused on negative growth, there's plenty of room for the consensus to be wrong. However, the uncertainty sets up a tough landscape for investors. Which forecast to believe? Do you go with the doomsayers and prep for recession, or do you take the optimistic view and hope to emerge from the dust with outsized gains? What it could all add up to, though, is tons of uncertainty. And we all know that page 1, paragraph 1 of the Wall Street handbook says that investors hate uncertainty. So strap in, because the ride could get awfully bumpy, with peaks and valleys abounding. "This year is difficult to forecast volatility going forward. The only thing for sure is it's going to be increased," said Veneta Dimitrova, senior U.S. economist for Ned Davis Research. "There's no silver lining. The volatility is here." Dimitrova said the investing management team at Ned Davis is telling clients to prepare for slower growth and higher unemployment. Inflation should moderate, but that comes amid a sharp slowing in the economy and a challenging environment for corporate profits. Yet there actually may be a silver lining. Even with fears of still-aggressive Federal Reserve policy and weaker economic growth, Ned Davis has a 4,600 target for the S & P 500 for the full calendar year of 2023. That's just shy of a 20% rebound from where the large-cap index finished in 2022 and indicative that even with a chilly wind blowing through the economy, investors can navigate their way through. "The thing to keep in mind is that equity markets historically have led the economy. Even though we have this bearish outlook for economic growth next year, we have to keep an eye on the broader picture and take into consideration sentiment and technicals in order to make the outlook for the stock market," Dimitrova said. "Our outlook is one for a bumpy ride. 2023 will be a year in which we come off a very strong post-recession, post-pandemic recovery. The most talked-about recession may materialize, but the reason to not expect a severe recession at this point is because we have been talking about one for such a long time," she added. "That has given businesses time to adjust to some of the parameters that typically get adjusted when a recession hits." A MENU OF OPTIONS The 2023 economy could take a variety of forms. The most common expectation is a shallow recession brought on primarily by the Federal Reserve's efforts to tame the soaring recession that started to take hold in 2021 and skyrocketed in 2022. Higher interest rates hamper the flow of money through the economy, cooling consumer appetite for spending and, in this case, hopefully tamping down demand for workers that has contributed to a spike in wages. Another alternative is more of the same from 2022: Slow-to-negative growth with continued high prices, contributing to a condition known as "stagflation" that gripped the U.S. economy through much of the 1970s and early 1980s. There's also the possibility of a steeper recession. While most economists are in the "shallow" camp, they worry that some unexpected event, such as a geopolitical crisis like the one in Ukraine or a rampant Covid variant that proves elusive to vaccines and more potent than previous iterations, sends the economy reeling. On top of that, there's worry that the Fed could overdo it in its efforts to tamp down inflation and causes unintended damage. Finally, there's the most optimistic case. In that scenario, inflation falls off fairly quickly, the Fed can stop raising rates, and unemployment increases but only gradually and incrementally, minimizing the pain consumers will have to endure. When adjusting portfolios in such an unpredictable climate, investors will have to weigh all the probabilities and prepare to be nimble for what transpires. TWO PATHS, TWO STRATEGIES Market veteran Ed Yardeni, who helms his eponymously named research firm, has an optimistic but pragmatic approach to the year ahead that he encourages investors to share. "There's a big controversy between investors who think we're going to have a soft landing and those who think we're going to have a hard landing. Seems the consensus is that we're going to have a recession this year," Yardeni said. "If that's the case, it's pretty clear you want to continue to preserve capital, particularly in the equity market, which means very defensive." Using the "hard landing" thesis, Yardeni advocates dividend payers from companies "that are less cyclical and likely will be able to generate profits in the market and at least hold onto their dividends. You want to avoid companies that pay dividends but may have to cut them, and you certainly want to avoid companies that are just unprofitable where dividends aren't really an issue." On the fixed income side, Yardeni said high quality corporate bonds as well as Treasurys can help investors weather uncertain and volatile economic times where the economy veers between recession and stagflation. High-yield bonds could offer opportunity at some point, but not now. Geographically, Yardeni said defensive investors will want to overweight the U.S. against the rest of the world. "Presumably, if we're in recession, so is the rest of the world, particularly China and Europe. So that would also imply that commodity prices would be relatively weak. So, you don't want to be in energy and materials, broadly speaking," he said. Yardeni, however, is not in the hard-landing camp. Instead, he sides with a much smaller group — which includes Goldman Sachs — that the U.S. economy will navigate its multiple crosscurrents and escape recession, presenting an entirely different set of opportunities. "If in fact the Fed doesn't cause a recession and companies are able to hold onto their earnings without the significant fall that would occur in a recession, some areas of the market could really be quite attractive," he said. "In a soft-landing scenario, the energy sector would continue to perform well. There's still plenty of need and demand for fossil fuels. But financials would benefit from an environment where interest rates are still relatively high, and the yield curve would start to descend again in a soft-landing scenario," Yardeni added. Industrials also would be a good place to invest, as fiscal policy has pushed more money into projects focused on green development as well as semiconductor plants. A LOT OF MOVING PARTS Everything will have to bounce right for the economy to avoid the worst-case scenario. In addition to the dangers posed by Federal Reserve tightening, there are also ongoing geopolitical threats in Russia, Iran and elsewhere, the lingering threat of new Covid strains, and a gridlocked Congress where deals on raising the debt ceiling and other key issues could be hard to come by. House Speaker Kevin McCarthy's struggle to get enough votes to be confirmed to the chamber's top position exemplified how hard it will be to get things done for at least the next two years. Corporate America also faces its share of challenges. Profits in the S & P 500 are projected to slide 4.1% in the first quarter, the first decline since the third quarter of pandemic-stricken 2020, according to FactSet. Analysts are expecting earnings to bounce back through 2023 for a full-year profit of 4.8%, but that's only on revenue growth of 3.2%. Even a relative optimist like Yardeni thinks the economy will experience "rolling recessions" where some sectors get hit with negative growth while other don't. An Institute for Supply Management gauge on the pivotal services sector showed contraction in December, same as the ISM manufacturing report. From a historical perspective, when the dual ISM readings both show contraction, a recession almost always has followed — 25 out of the prior 26 times, in fact, according to Bespoke Investment Group. "There's enough to be concerned about a hard landing so that I'm assessing a 60% probability of a soft landing and a 40% probability to a hard landing," Yardeni said. "There are a lot of moving parts that don't necessarily add up to a hard landing." TIME TO REASSESS In this kind of environment, RBC Capital Markets portfolio analyst Kelly Bogdanova said she's telling clients to take stock of their portfolio allocations and make sure that they're aligned with long-term goals. Trying to play the vagaries of this kind of market can be difficult, so sticking to strategy is vital. "When we go through these very volatile periods like this, portfolios tend to get out of whack," Bogdanova said. "When the market starts a new bull cycle, there's no bell that's going to ring. Lightning's not going to flash, it's not going to be announced, it's just going to happen, and it usually happens during a recession." Indeed, stocks as a forward-looking mechanism often start rising before a recession cycle is complete. The old adage is that bear markets end on bad news — the implication being that the market at some point will price in all the bad news and investors will start looking for bargains ahead of the next bull run. "For long-term investors, if you miss those days in the market, those days when the market starts to stabilize and then turn up, it actually impacts long-term performance very negatively. So, we think investors need to take this time to adjust portfolios back to long-term strategic allocations," Bogdanova said. The wild swings in the market and the accompanying fear likely have left investors below their normal allocations to stock, which she advocates they fix. One area RBC like is small-caps as a value play now. The firm also likes energy and industrials, same as Yardeni, and also sees good fixed-income plays in intermediateand longer-dated bonds as well as some areas of the high-yield market. While the firm still sees a recession as the most likely case, it's advising clients to remain allocated to stocks while the storm passes. "The market is giving a clear message that if the Fed hike rates too much, the economic consequences could be worse than what is necessary," Bogdanova said. "We think it is most likely that we're going to have a recession. We think the indicators are pointing to that. That's what our allocation strategy is set around."