Position your portfolio for a rally

‘The number of smaller problem lenders continues to rise and institutions are still being closed but at the sector level US banks’ profits rebounded to pre-crisis levels in the second quarter, as falling loan losses led to reduced provisions and higher income.’

Poole says that on the balance of evidence, concerns about the global economic slowdown appear exaggerated and double dip looks likely than a double dip. The Fed and Bank of Japan’s are committed to providing liquidity, while market rates are set to remain lower for longer.

‘This should prove to be positive for key risk assets. Eventually, this liquidity should seek out yield and return in markets where fundamental anchors remain strong, particularly emerging economies,’ he says.

‘With developed world debt delivering very low yields, we see significant relative value in emerging government debt and yields are likely to remain supported in both external and local debt markets.’

'For external debt a rally should be expected to produce outperformance of higher yielding sovereigns and a general compression of spreads for the asset class. Markets could also become less aggressive on expected hikes in policy rates where inflation is not an immediate threat.’

‘Having corrected from recent highs earlier in the year, on many standard valuation metrics, emerging markets equities also now offer medium-term value. In a BRIC context, Russia stands out. In sector terms, we favour gaining equity exposure to the emerging consumption theme which we see as a powerful secular story as global rebalancing proceeds.’