Over the past decade, investors have weathered an extraordinary range of market conditions. We have had our fair share of market shocks: in 1998, strong bull market conditions were harshly interrupted by Russia defaulting on its sovereign debt and the high profile collapse of hedge fund Long Term Capital Management; two years later, after a huge runup in stock markets, the Internet bubble burst to be followed shortly after by the tragic events of September 2001.

We have endured the harshest bear market in a generation, in which the value of stock indices such as the FTSE 100 more than halved. But we have also enjoyed some bountiful years, not least the exceptionally benign conditions for stock markets that have endured for the past four years.

The point at which the current bull market came to life, ending the 2000-2003 bear market, can be readily identified: the start of the Iraq war, in March 2003. If ever there was a turning point in markets, this was it and, for us, the cue to switch as aggressively as possible into equities, which had by then fallen to excessively cheap levels. Barring a few speed bumps along the way, the market has headed steadily higher since then.

Driving this powerful recovery has been the sustained and dramatic growth in company profits. After the exuberance of the bubble years, many companies' balance sheets were left in poor condition as a result of rash acquisitions and excessive investment.

This forced them into a process of painful restructuring, taking measures such as shedding unprofitable businesses, cutting workforces and launching emergency share issues to help rebuild their balance sheets. But the medicine worked; corporate profit margins in the US are now at their highest level for forty years and companies are rewarding shareholders with dividend rises and share buybacks. Also of huge significance in the past few years has been the growth in emerging markets, where globalisation has opened up new markets, not just, for example, for exporters in China, but also for western companies looking to access new markets.

But after more than four years of rising equity markets, should investors be starting to grow more cautious? Yes and no, would be our answer - it depends on your time horizon.

In the medium to longer term, we are happy to keep as much money as possible in equities. Compared with the other main asset classes, bonds and property, the case for equities is far stronger. With interest rates on the rise in many markets - the UK, eurozone and Japan (and maybe even the US) - it is hard to see any value in bonds. Similarly, higher interest rates are starting to hurt residential property markets, notably in the US and Spain. In contrast, companies are still growing their profits well and are holding high cash balances. At the same time, equity markets are not expensive in historical terms.

In the shorter term, we have had a cautious eye on the market rally that began last summer after a brief correction in May/June 2006. In recent months, we have been letting cash build up in our portfolios, for two reasons. In our most cautious portfolio, Jupiter Merlin Income, our focus is much more on delivering a sustainable and rising income, at the same time as offering scope for capital growth.

At a time of rising interest rates, it has been a difficult environment for bond fund managers to generate positive capital returns. In contrast, cash offers a reasonable yield, with interest rates at 5.75%, but no risk of capital erosion. While we have been using cash as a proxy for bonds, we also feel that, as equities have had a strong run, having some cash on deposit is a sensible strategy in the event that buying opportunities emerge in the months to come - we are, after all, still positive on the longer term outlook for equities.

In our most adventurous portfolio, Jupiter Merlin Worldwide, we have let cash levels build up, but we have not fundamentally altered the focus, in that we are continuing to hold specialist emerging market equity funds, in addition to a range of developed market funds. Whatever the market throws at us in the short term, we still think that equity markets are clearly the right place to be invested.

Past performance is not a guide to future performance. The value of an investment in a unit trust can fall as well as rise.