Investors should still be favouring emerging markets but holding more developed equities than before, and continue to diversify out of cash, according to Barclays Wealth’s investment calls for March.

The private bank’s favourite emerging region remains Asia, especially China, Taiwan and South Korea, where it says the case for long-term investing is still viable.

In terms of developed equities, the bank favours the US and continental Europe over the UK and Japan, as it thinks that while valuations are undemanding in most regions, these two will benefit from the biggest upgrades in investors’ views on corporate recovery.

High yield and emerging market bonds are appealing and offer a yield of around 7 per cent, says Barclays Wealth, and can still offer some exposure to the ongoing recovery. Meanwhile, the bank describes its small overweight position in high quality government bonds as “portfolio insurance”.

“Global economic news has been steadily improving and investors have become more comfortable with risk as reflected in the low level of market volatility and a weaker US dollar. We therefore recommend that investors continue to target portfolio risk above strategic norms,” says Aaron Gurwitz, the firm’s chief investment officer.

However, Kevin Gardiner, head of global investment strategy, noted that while there is an ongoing equities rally potential risks – namely geopolitical strife and inflation – demand close attention.

“Our view is that both issues remain a potential threat on the horizon, but do not alter our tactical asset allocation for this month.  In short, we reiterate our stance that investors continue to sit tight, stay invested and diversify out of cash, even though the chance of higher interest rates has risen,” he said.