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So far this year, US equity markets, driven by the major technology stocks, have clearly dominated the rest of the world. However, very little of this dominance has remained recently. In the meantime, the high market capitalization of megacaps has rather become a burden, pulling the entire US stock market down. The correction among the tech giants still appears to be a technical market adjustment after previous overheating. But the relative weakness of the technology sector could persist in the medium term if investors focus more strongly on the period after the corona pandemic. Despite the continued high number of CoViD19 cases at the global level and a rampant second wave in the eurozone, it is increasingly foreseeable that a functional vaccine will be available in 2021 and a gradual return to normality will take place. In this scenario, the main services offered by tech companies, such as online shopping, streaming and social networking, would be less in demand than during the pandemic. On the other hand, cyclically sensitive sectors that were disproportionately affected by CoViD19 would be the clear winners as soon as the economy has stabilised on a sustainable basis. A corresponding rotation into cyclical stocks is already emerging and, in the event of an emergency, will cause a clear rethink by investors who have been focusing on the tech sector for years.
Another development that investors should keep an eye on is the US Federal Reserve's change in strategy. In the future, the FED wants to be much more tolerant of higher inflation rates if, as is currently the case, inflation remains below the target level of 2% for a longer period of time. According to this principle of so-called "average inflation targeting", a long period of zero interest rates can be expected. Other central banks such as the ECB are likely to adapt the monetary policy strategy of the FED in a similar way. As a result of the FED's change of course, the USA could gradually develop into a low-interest region and the temporary weakness of the US dollar could thus become chronic. The FED's higher inflation tolerance could even lead to real interest rates, which are already in negative territory, falling to even lower levels in the future. In this scenario, the prospects for money investments in precious metals in particular would improve. Against this background, investors should review the weighting of the US dollar in their strategic asset allocation and give precious metals a firm place.