We’re exiting 2012 in much better shape than we entered: The contentious US elections are behind us; Europe seems to have its debt crisis under control; and China’s slowdown appears to be temporary.

What many investors assumed would be a turbulent year really wasn’t.

Let’s start with stock market volatility. The VIX (the Chicago Board Options Exchange Market Volatility Index), which is used to gauge expectations of future volatility, actually fell almost 24 percent over the course of the year, from close to 21 in January to just 16 in early December.

And stocks have performed well. The S&P 500 managed to return a respectable 12.6 percent by early December, even after the corrections in May and October. Still, you’d have a hard time proving this by the frayed nerves of most investors. So let’s all take a deep breath. Thankfully, none of the worst-case scenarios came to pass. That’s not to say we’re on easy street. Some big questions remain unanswered, such as whether Congress can dodge the fiscal cliff. But we’ll know that soon enough, by early January at the latest.

I look for equities to be at higher levels by the end of 2013, particularly in the emerging markets.

China is likely to remain weak next year, even if its new leadership launches a stimulus program. But the rest of Asia should perform well. Indonesia, Malaysia and Thailand should be particularly bright spots as they pick up much of the slack created by China, and their vibrant consumer economies continue to grow. Latin America should also rebound next year as demand for commodities improves based on stronger global growth.

Conversely, I’m leery of US fixed income in 2013, particularly junk bonds. The higher yields of junk bonds have attracted more than $65 billion in inflows in 2012. Issuers large and small have been more than willing to oblige that demand. Defaults on non-investment grade debt picked up in 2012, as weaker issuers bailed on their obligations. While I don’t anticipate a wave of defaults, I do expect the popularity of higher-risk investments to wane, especially if interest rates start to climb in 2013.

I wouldn’t abandon bonds entirely, though— investment-grade issues have a place in every portfolio. As fund manager Don Wordell advises in this issue’s Insider’s Edge (pages 4-5), stay diversified and committed to your long-term investment strategy.