Continue to hold developed markets equities while cutting weightings in bonds and credit as higher interest rates approach, UK-based Barclays Wealth, a leading global wealth manager, has advised its clients.

Aaron S Gurwitz, chief investment officer at Barclays Wealth, said: “Despite the awful events in Japan, and continuing uncertainty over the situation in the Middle East and North Africa – increasing the expectation of higher oil prices - we don’t believe this will be enough to reverse solid global economic growth or derail the two-year old equity market rally.”

“In fact the most important threat to global recovery probably still comes from higher interest rates.”

Kevin Gardiner, head of global investment strategy, said: “There are some very visible near-term uncertainties facing investors currently, but we believe that the ongoing context remains one of economic and corporate recovery – albeit a recovery that has some interest rate risk attached.

“Against this backdrop, we urge investors to guard against knee jerk reactions and stay positioned for recovery.   We all find it difficult to respond rationally to crises, but the financial costs of overreaction and trading too reactively can be high.”

While the long-term attractions of emerging markets remain intact, Barclays is strengthening its tactical preference for developed markets ahead of the emerging bloc.

Growing profits have left developed-world equity markets looking the least expensive of the asset classes, the firm said in a statement.

As higher interest rates approach, cut weightings in bonds and credit and reduce underweight in cash, the investment guide said.

The interest rate debate is becoming a more active consideration for asset allocators. The prospect of rising rates is likely to provide something of a headwind to fixed income markets in particular.  As a result, Barclays Wealth is switching a significant amount out of bonds and into cash, it added. – TradeArabia News Service