Barclays Wealth is advising investors to move past the crisis and to get in position for the economic recovery.

In its monthly strategy review, Compass, the wealth management firm reports that economists are upping growth forecasts for 2010, while also being more confident about their predictions.

“It is time to move beyond last year’s trauma and take a business-as-usual approach to investment decisions. That means, broadly, holding more stocks and fewer bonds than typical and having more exposure to asset classes and sectors that do better in early stages of recovery,” said Aaron Gurwitz, head of global investment strategy at Barclays Wealth.

The report confirms what many analysts have expected for a while, namely that emerging markets are recovering faster than the economies of developed nations. Barclays Wealth therefore suggests to seek diverse exposure to Asian economic growth.

The firm believes that short-term interest rates will remain very low for the time being, while longer-term yields are likely to rise soon.

At the same time, however, the report states that policymakers are reticent about being too enthusiastic about this recovery, as they fear that a number of headwinds will limit its pace.

Barclays Wealth advises investors to buy US small-cap stocks, as these assets normally outperform the market as a whole during a recovery phase. This has recently happened in Europe, but not yet in the US, but the firm expects this trend to take place in the US shortly. 

Barclays Wealth also expects commodity prises to rise, after the sharp fall during the recession.

Furthermore, the firm anticipates that monetary policy will be tightened in the major economies much more slowly than current market prices imply. Therefore, the firm suggests investing in inverse-floating-rate and capped-floating-rate notes.

Among Barclays Wealth's recommendations is for investors to buy “first-to-tighten” currencies, specifically the Norwegian krone and Australian dollar, in the belief that interest rates will rise soon in Norway and Australia and perhaps by more than the markets expect. Barclays Wealth therefore advises taking long positions on these currencies and going short on the US dollar, the euro, the yen or a combination of the three.

“There will be both tactical opportunities, due to current market mispricing being righted, and structural opportunities, connected for example with the rise of Asia,” said Kevin Gardiner, head of EMEA investment strategy.

“It is important to remember, however, that each economic cycle is unique; and prices of some typical early sector winners, such as emerging market equities, high yield bonds, or European small cap stocks, already reflect the expectation of a recovery,” he added.