What makes Switzerland an economic success story?
Over the past 25 years, Switzerland has built an impressive economic record. The country has recorded budget surpluses in 17 years, reduced public debt from 52% to 39% of GDP, maintained a strong industrial base, and consistently generated trade surpluses. Inflation has also remained under control, staying below 2.9% even during the global inflation shock of 2022. Over the same period, Swiss equities returned an average of 6% per year, while the Swiss franc appreciated by 3.2% annually. Put simply, Switzerland already possesses many of the economic characteristics that policymakers elsewhere are striving to achieve.
Why did Swiss equities lag despite strong fundamentals?
Following last year’s tariff‑related turbulence, the Swiss economy has been on a recovery path so far this year. The rebound gained traction in the first quarter, mainly driven by stronger exports and a buoyant industrial sector, supported by reduced US tariffs.
Despite this improving backdrop, Swiss equities lagged global markets in the first half of the year, although they still delivered a solid 7% return. Their underperformance had little to do with weakening fundamentals and much more to do with the narrow nature of this year’s rally. Global equity performance has been dominated by a handful of large technology and artificial-intelligence-related companies, particularly in the US. Switzerland, by contrast, has very limited exposure to these areas. Its market is dominated by healthcare, consumer defensives, specialised industrial businesses, and financials.
An effective diversifier in a global portfolio
Yet the Swiss market’s relative underperformance should not be mistaken for weaker corporate quality or profitability. On the contrary, companies in the Swiss Market Index (SMI) have consistently generated higher returns on equity than those in the Stoxx Europe 600 Index and even in the S&P 500 Index, reflecting the strong profitability of Swiss companies. This feature makes Swiss equities not only an effective diversifier in a global portfolio, but also a profitable one.
The factors that have weighed on Swiss equities in recent months may now be turning into advantages. As investors rotate away from technology stocks and towards sectors such as healthcare and financials, areas where Switzerland has significant exposure are starting to perform better. Since the end of May, healthcare and financial stocks have outperformed in both the US and Europe, while technology shares have declined.
Why are Swiss Equities well positioned for the second half of 2026?
Looking ahead to the second half of 2026, our Research analysts expect market gains to become more broadly distributed across sectors and regions. If previous US midterm election years are any indication, markets could become more rangebound over the summer, with investors rotating between sectors rather than concentrating on a small group of stocks. This backdrop could favour Swiss equities, which have relatively low exposure to technology and greater exposure to sectors such as healthcare, consumer staples and financials. Encouragingly, sentiment towards previously weaker sectors, including pharmaceuticals, luxury goods and consumer defensives, is beginning to improve, with earnings expectations stabilising and several stocks offering attractive valuations.