Investors should be looking towards North America as the second quarter of 2013 has proved positive for the US economy, according to Barclays weekly investment report.

With a 1.7 per cent gross domestic product growth from 1.1 per cent in 2012 the US economy has avoided an expected slowdown, confirming the bank’s beliefs that an eventual tapering of the Federal Reserve’s quantitative easing programme will not have a negative effect on US economic growth.

“Accelerating growth in the US means that the Federal Reserve is indeed likely to taper its QE in the months ahead (most likely from September). This is good news, not bad. It may confirm our belief that the US economy is able to stand on its own two feet. As we see it, QE has been the financial equivalent of a crash barrier at the side of the road, not the motor of economic growth”, said Kevin Gardiner, chief investment officer for Europe at Barclays.

Similarly, the firm maintains that a tapering - or reduction - of the QE in the context of a cyclical upswing will prove beneficial to investors betting on equities and certain fixed income products. With an overweight of tactical asset allocation on developed market equities, the report suggest that investors should position their portfolios for a eurozone and UK recovery, exposing themselves to structural and cyclical growth.

In this respect, European fixed income high yield bonds are considered the preferred segment as financial conditions improve and data on returns stabilise. As of this week, the market value is at €250 billion compared to €80 billion in 2008.

“Long-term interest rates may rise still further, and not just in the US but in Europe too. And if long rates rise far enough, they will continue to pull implied short-term interest rates in 2014 higher”, added Gardiner.

The report also noted that cooler temperatures have curbed demand for commodities such as gas recently, leaving short-term risks to appear skewed to the downside. Other firms have recently noted the poor returns of commodities, with precious metals doing especially badly, resulting in several investment firms encouraging investors to buy equities and high-yield bonds instead.

Similarly, Barclays also observed a potential for downside risk to sterling as the FX markets await the Bank of England’s August Inflation Report, which could raise the bar for good economic data to feed into monetary tightening expectations. Instead, investors should bet on the US dollar despite recent reports showing mixed results for US employment rates, the firm said.