The private bank has become less pessimistic about stocks, and has moved to holding only a mildly underweight position on equities. Explaining its views, RPB&T said the investment case for holding equities has improved, citing solid company earnings and undemanding valuations.

“Equally important, the US Federal Reserve is committed to reflating asset prices and we believe it is hard to fight a determined Fed,” Dirk Wiedmann, head of investments, said in the latest monthly outlook.

Equities had a strong run in September, with the S&P 500 rising by around 9 per cent and continuing to climb in the following month by 3.7 per cent.

RPB&T continues to be overweight on hedge funds as the bank argues that the climate is favourable for talented hedge fund managers.

Rothschild remains optimistic on gold, arguing that more quantitative easing – as announced recently by the Fed – will raise the risk of inflation, which has typically proven positive for gold as a safe-haven asset in the past. The bank said any dips in the gold price will prove short-lived. “We are adding to our already sizeable positions ,” it said.

For other commodities, RPB&T said the economic outlook has improved and it has moved towards a neutral position overall.

In regards to government bonds, Rothschild advocates a large underweight position. Explaining its negative stance, the private bank said that bond yields in the US, UK and German markets are near record lows; it said the long term outlook for such assets is “bleak” due to concerns about inflation and high government debt issuance. “In our view, government bonds would only be attractive in a Japanese style downward spiral of depression or reflation,” it said.

Another area in which RPB&T continues to have an underweighted position is real estate. The short-term outlook is mixed. Property is considered risky since weak economies are holding down rental growth. Yet, more positively, the firm continues to have a watchful eye, bearing in mind that exceptionally low bonds could give investors more incentive to look into property. Long-term investors should remain positive about real estate, as it is a tangible asset with predictable cash flows and can help protects against inflation, the firm said.

Overall, Rothschild is confident the economy is on a stable recovery and the risk of another recession is minimal. The global economic outlook is strong, due to US expected job creation being higher than predicted, rising business confidence in Germany, and solid figures on UK gross domestic product. Furthermore, China, though recording a slight slowdown from quarter two, has shown a strong GDP growth rate rising to 9.6 per cent.