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The brilliant recovery on the global stock markets is slowly fading. Fresh impetus that could prolong the upswing of recent months is currently not in sight. At the same time, economic expectations have peaked. As a result, the cyclical market segments are no longer as dominant as they were a few weeks ago. The all-important question remains, what is inflation doing? The first thing that stands out is the strong year-on-year increase in prices. However, this is primarily a statistical effect, because after all, the global economy has recovered from a much lower starting level in the crisis year. By contrast, inflation signals that should be taken seriously are coming from the US. There, above all, rising wage pressure and private households' expectations of rising consumer prices could seriously exacerbate inflation.
In this confusing situation, even the crisis-experienced US Federal Reserve is struggling to find the right monetary policy course. The hawks favor up to six rate hikes by the end of 2023, while the doves do not envision a single rate hike for the same period. As a result, the Fed's monetary policy is likely to become more unpredictable in the weeks and months ahead, a factor investors should consider as part of their portfolio management. At the same time, cyclically sensitive equity segments are past their best and should be selected by experts on the basis of increased risk-return considerations.
Vaccine progress and the success in containing the Corona pandemic have recently made the eurozone more attractive to investors again. While the US had momentum on its side in the first half of 2021, the eurozone is taking the lead as the engine of the global economy in the second half. An important factor here is also the now fully ratified European Recovery Fund, which will stabilize the fragile peripheral countries in particular in the coming months and years. At present, therefore, European equities offer good prospects for outperformance versus the global equity market. Provided, of course, that the global economy continues to grow. China could turn out to be a spoiler here, as monetary tightening is on the agenda there. Should this have a negative impact on the Chinese economy, the global economy would automatically be affected. European equities, which are generally heavily dependent on exports, would be disproportionately affected in this scenario.