In the past seven months, the sharemarket rallies in the United Kingdom and Australia had been the largest since the market indices began, Forsyth Barr broker Peter Young said.
In the United States, a rebound of the magnitude seen over those seven months had not been experienced since the recovery from the 1929 crash.
"While we are on record early this year as expecting a market rebound in 2009, and a quarter ago as expecting a further positive quarter, it is fair to say that the speed with which markets have moved to assume a more `business as usual' environment has surprised us."
Most previous examples of market rebounds following major downturns showed that market performance following the initial rebound had been broadly flat, he said.
Given the strength of the rebound in global markets, and what was believed to be a relatively fragile recovery, Forsyth Barr was increasingly cautious concerning global market prospects in the short term.
"In particular, we note that the strong rally of the last six months had been driven by cyclicals, which look to us to be assuming too much too soon.
"In this environment, we believe that rather than chasing market momentum, investors should be becoming more cautious."
Mr Young recommends investors reposition their portfolios to include more defensive stocks with positive growth which could continue to perform well even in an environment where uncertainty might increase again.
Markets from here on were likely to favour a stock-picking approach, with the rising-tide effect of the broad-based rally likely to fade, he said.
The New Zealand market had lagged behind most markets during the recovery, although the strength of the dollar had meant that in dollar terms, of the markets actively followed by Forsyth Barr, only Australia had outperformed New Zealand.
However, the relatively modest recovery in New Zealand to date suggested there might be more selective opportunities in the New Zealand market than in some of the larger global markets.
The average length of past major equity market corrections for the Standard and Poor's 500 had been around 15 months, Mr Young said.
The subsequent rallies occurred over the relatively short period of six to nine months from the trough.
"We are now seven months into the recovery rally, which suggests that further upside from current levels is likely to be limited."
The stocks Mr Young believed should perform strongly as the earnings upgrade cycle occurred were:Auckland International Airport; Fisher and Paykel Appliances; Hellaby Holdings; Hallenstein Glasson; SkyCity Entertainment; Tourism Holdings.
