World stocks, measured by MSCI, briefly hit a five-week high on Friday, extending their recovery from a June sell-off prompted by concerns about the euro zone debt crisis and weakening economic momentum.
But in the past week stocks made little headway and they are up just 5 percent since January.
Investors remain nervous about the impact of a potential default in Greek sovereign debt and contagion to other weak peripheral countries in a saga that is unlikely to end any time soon.
A smaller-than-expected rise in U.S. non-farm payrolls in June was also a drag, but other recent data showed the economy is coming out of a soft patch in a global economy still expected to grow at a healthy 4 percent this year.
Investors are also uncertain whether China's latest interest rate hike leaves Beijing near the end of a nine-month long policy tightening cycle as its economy eases gently but inflation stays elevated at 34-month highs.
This tug-of-war prevents any single asset class from strongly outperforming others and investors are forced to keep neutral allocation for now.
"Investor concerns are primarily about the soft patch and the European crisis. The insolvency situation is required for the euro zone, which is very difficult to achieve when you have so many policymakers involved," said Carl Astorri, global head of economics and asset strategy at British private bank Coutts.
"We seem to be stuck in a world where people are not having strong conviction. People don't seem to have a staying power to hold positions. But you're getting nothing on cash. Ultimately we think people will get rewarded for taking risks."
Coutts is overweight on equities, especially in emerging markets, and has a strong underweight position on government bonds.
International bankers and European Union officials are in a deadlock over how private creditors might voluntarily maintain their exposure to Greek sovereign debt. Euro zone finance ministers will meet in Brussels next week.
The second-quarter earnings season, which kicks off in earnest next week with results from Alcoa (AA.N), JP Morgan (JPM.N) and Citi (C.N), is likely to offer a key insight into the health of major companies.
Earnings growth of companies on the S&P 500 index .SPX is expected to ease to 7.5 percent in the second quarter, before accelerating again to 16.6 percent in the third quarter, according to Thomson Reuters data.
And low policy rates in developed economies offer the underlying support for the global economy. The Federal Reserve, which just finished its $600-billion bond buying program, is expected to leave interest rates near zero well into 2012.
Similarly, UK interest rates are expected to stay on hold, at 0.5 percent, until 2012.
The European Central Bank may tighten once again this year after its rate hike this week, but is unlikely to embark on a series of aggressive interest rate rises.
"For the time being, easy borrowing conditions, amplified by an easing in credit standards, is a key support for growth," JP Morgan said in a note to clients.
"At the same time, healthy balance sheets and strong profit margins are encouraging the non-financial business sector to pick up the pace of spending growth on capital and labor."