The global economy is “entering the next stage of spring”, according to UBS Wealth Management Research, arguing that the US has responded and shown recent strength, although geopolitical worries in the Middle East and North Africa remain a concern.

The Swiss bank said that stocks are its preferred asset class, citing supportive company earnings and economic growth, although it argues that emerging market equities will lag against the developed world’s markets in the second quarter of 2011.

Equities are seen by strategists as being better prospects for investors at a time when central banks, led by the US Federal Reserve, have injected billions of fresh credit into the system - via "quantitative easing" - to reflate sagging economies after the 2008 credit crunch. On the other hand, government bonds in many Western nations, for example, have lost their “safe haven” sheen amid fears about inflation and high public deficits.

“We are still concerned about the peripheral European markets and maintain a negative view on equity and sovereign debt from these areas,” the firm said in its regular overview of investment issues.

“Similarly, we maintain our view that the returns on offer from G7 government bonds do not reflect the credit and interest rate risks.  Instead, investors should cherry pick corporate bonds: we favour multi-nationals in the industrials and utilities sectors and recommend investors avoid the financials sector,” the report said.

“In addition, investors should consider emerging market government and covered bonds,” it added.

The bank said its “favourite five” currencies are the Australian and Canadian dollars, the Norwegian kronor, Swedish crown and Swiss franc. As for oil, it believes it will remain under upward pressure and that there is little chance of a further major spike in the price. Due to the desire for safe haven assets, UBS said gold will remain in demand, and has a price target of $1,650 per ounce.