Despite recent sharp-rises investors should keep on the straight and narrow throughout a varied next few quarters, says Sarah Arkle, chief investment officer at Threadneedle.

The August rally has given world markets confidence, believing that economic activity has turned a corner.

Encouraging gross domestic product figures have emerged from Germany and Japan while Singapore, Taiwan and Korea have all upgraded their expectations for second half activity. Overall, widespread rises in GDP are set for the near-term.

In the UK focus is on the commercial property market. The Bank of England is expected to help by keeping yields low and encouraging movement from reserves into fixed income and loan markets. With yields at almost 8 per cent and fewer investors liquidating assets, says Ms Arckle, the balance between buyers and sellers is starting to shift.

The upshot all of this is that Threadneedle are overweight on the credit and emerging bond markets.

Central banks are still keenly attuned to the dangers of high interest rates and so can be expected to continue with sympathetic monetary policies while fiscal stimuli will also be backing quarterly growth for the remainder of the year.

The drawback, however, is that volatility is expected to increase throughout subsequent quarters rendering medium-term estimates below consensus. This, Ms Arkle suggests, may result from recent fiscal programmes borrowing demand from future quarters, as well as nervousness about long-term governmental support.

Regarding equities, and continuing the theme of low medium-term growth, Threadneedle is taking a modest position on sectors, preferring stocks, and will value so-called defensive companies.

Hence Threadneedle are neutral on oil sectors, citing a high accumulated volume of crude and distillate oil, and mildly bullish over Chinese, Pacific Basic ex-Japan and European equities.