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Investors have been far too cautious and need to venture into riskier sectors, such as financials or basic materials.

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They'll be rewarded because global markets are rebounding, says Jean-Baptiste Nadal, managing director and lead portfolio manager of global equities at Metropolitan West Capital Management. He's also an analyst for the Renaissance U.S. Equity Value Fund.

Read: Time to dump bond funds?

What's helped sparked a change in sentiment, he says, is the resolution of major debt crises on both sides of the Atlantic. This has supported markets and triggered equity inflows.

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The best thing that happened in 2012 was clarity was created around the ECB policy, says Nadal. "In the summer, Mario Draghi [declared he] was willing to backstop any country within the Eurozone."

He adds, "Monetary authorities in the U.S., Europe, Japan have also been very accommodative, creating a floor for equity markets globally." Similarly, the last-minute prevention of the U.S. fiscal cliff proves political agreements on such issues are positive for markets.

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Nadal says money managers will still pick stocks despite perceived risks.

"We're focusing on high-quality companies outside and within in the U.S. That is structurally our strategy. The [real] risk for investors is to be too defensive and too cautious."

Read:

The difference between volatility and risk

The risk of waiting

S&P analysts bullish for 2013

When markets give you volatility, invest

Originally published on Advisor.ca

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