The firm says rising volatility and recent retreats make the case for adding to equity and fixed income positions.

Fidelty International's multi-asset arm has taken a bullish position on equities and fixed income, arguing that rising volatility and recent falls opens an opportunity for investors.

The firm had held a neutral position in stocks and bonds prior to the change. It is now also underweight cash, it said in a statement late last week.

“As we start 2019, it is clear that investors will have to think differently about positioning than they have in recent years," James Bateman, chief investment officer, multi-asset, at the firm, said.

"The era of market beta driving returns is now firmly behind us, and the volatility that kicked off the final quarter of 2018 has not dissipated. We believe this is likely to continue, especially as the usually tranquil festive period was hit with uncharacteristically wild swings in the market: Christmas Eve was the worst in recorded history for stock markets, followed by the largest move in percentage terms for stocks since 2009 two days later. But with heightened volatility comes opportunity for active investors, and we believe it makes sense to put some risk back on the table," he said.

“While we aren’t taking a broad-based risk-on posture, we are adding to risk where we see compelling risk-reward opportunities. As ever, our focus will be on preserving capital while taking advantage of opportunities that present themselves in these uncertain times," Bateman continued.

“In equities, there is the possibility of a last leg in the bull market, but given the significant disparities in global equity regions, we are being highly selective in spending our risk budget. Our key move is our overweight emerging market equities, as we believe there is attractive entry point on a valuation basis, and headwinds such as USD strength and a high oil price appear to be fading," he said.

The firm is also bosting its fixed income exposure, being selective on the areas it chooses because central banks are starting to "normalise" interest rates. Downside risks to the market are limited because of subdued inflation and weak oil prices, he said.

“Finally, we have also moved underweight cash, which is driven by our view that a fixed income/equities barbell is a more judicious approach than allocating to cash in case inflations does rear its head," Bateman added.