In its monthly investment outlook for April Clariden Leu said that after a disappointing January and a depressing February, there were finally a few glimmers of light in March.

However, despite these green shoots, it claimed it is still too soon to switch into riskier investments in a big way.

It highlighted factors such as the US Treasury Secretary putting forward a well received bank rescue plan, and various other economic indicators which all pointed to a tentative stabilisation of the economy.

However, with inflation falling into negative territory in developed markets, and with markedly slower growth in the emerging markets as industrial output is declining, capital flows are threatening to
dry up and currencies remain under pressure, it is not likely to improve dramatically in the short term.

It said that as a result of expansive global monetary policy and deflationary pressure, government bond yields would remain low for the time being. And that first-class corporate bonds from companies in defensive sectors and with healthy balance sheets offered the most attractive risk/return ratio.

In terms of asset allocation it still favours bonds and cash over equities. It said: "In the case of bonds, we are definitely focusing on investment grade paper. Government bonds should continue to benefit from aggressive monetary policy in the short term.

"Nevertheless, we have reduced our recommended duration because of the looming threat of inflation. Since the more cyclical sectors should do better from a trend reversal on the equity markets, we advise investors to start building initial positions in these areas cautiously - in cyclical consumer stocks and the IT sector, for example."
Investment Strategy.