The asset manager stated, however, that some concerns such as sluggish growth, stress points and the normalisation of monetary policy still remained.
In its global outlook, State Street Global Advisors said it predicts the United States will experience accelerated growth next year.
It expects the US Federal Reserve to begin tapering its asset purchases, which would see rates begin to return to normal levels for those economies performing well.
Rising rates could, however, result in increased demand for fixed income assets such as high yield and loans, absolute return to cash benchmarks, and short duration corporate and floating rate notes.
The global outlook said while Europe’s recovery is still fragile, economic activity has stemmed from particularly low levels and the region is predicted to experience modest growth.
According to State Street Global Advisers, European peripheral debt stocks will rally, while small caps and high yield will continue to perform well.
While the UK may experience inflationary pressures, it is expected to be the best G10 performer.
The long-term outlook for emerging markets is also positive, despite the turbulence of the last 12 months.
Emerging markets will be affected by the conflict between a strengthening global economy and the strengthening dollar.
State Street Global Advisors believes the ‘Chinese Dream’ initiative, which aims to shift the economy from an export driven model, will be positive, predicting 7.5 per cent growth in 2014.
The global outlook said while bond and equity valuations currently offer good value, investors will need to be selective.
Emerging markets will be heavily influenced by the decisions of policymakers.
The outlook said while China may no longer be experiencing 10 per cent per annum growth, it is still set to overtake the United States as the biggest global economy.
Building portfolios with diversification could also be challenging given the market environment of 2014.
Global chief investment officer at State Street Global Investors said while 2013 was a year of stabilisation, 2014 will be a year of recovery.
“While we are not discounting potential risks, like government and central bank policy changes or geopolitical issues that could disrupt the growth story, there are plenty of positives to catch the investor’s eye for 2014,” he said.
