Most of these global developments offer cause for hope. Yet sentiment among clients I have spoken with remains cautious, often because they are fearful about local events, including political risks in the likes of Brazil, the U.S., and the UK. If addressed incorrectly, these fears could significantly hamper portfolio performance. The investment principles used to manage such situations apply across the board: hedge what you cannot know, limit exposure to specific risks, and don't overreact to potential tail risks.
The outlook has brightened for well-diversified investors, and the same factors that spooked markets at the start of the year have turned more supportive in the past month. The rally in U.S. high-yield bonds and improving conditions in the world's largest economy argue for a rotation out of U.S. high yield and into U.S. stocks.
Yet, in spite of improved economic data and further central bank accommodation over the past month, investors must remain vigilant and continue to diversify their portfolios. Profit growth is muted, and individual risks still have the potential to undermine markets. We still prefer to wait for clearer evidence of accelerating growth and earnings before adding significantly to risk.
Commentary by Mark Haefele, global chief investment officer at UBS Wealth Management, overseeing the investment strategy for $2 trillion in invested assets. Follow UBS on Twitter @UBSamericas.
For the latest commentary on the markets in the U.S. and around the world, follow @cnbcopinion on Twitter.