Solid Swiss foundations stand up to global strains

The past year has tested Switzerland’s export-oriented economic model. US tariffs, supply chain disruptions and a strong currency left the country looking unusually vulnerable. Today, the picture is much brighter. We examine the reasons behind the improved growth outlook, and our views on Swiss assets.

A year ago, the Swiss economy faced the threat of a 39% tariff rate on its exports to the US, more than double the level imposed on its European neighbours. This would have represented a blow for an export-driven economy with a strong currency that had increasingly oriented its trade flows towards the US, given subdued European growth.

The situation now looks very different. After negotiations and pledges by Swiss firms to invest around USD 200 billion in the US, the tariff rate on most Swiss goods was reduced to 15%. Certain export categories are subject to a separate, lower tariff of 12.5% that was imposed in July 2026.

And despite the impact of tariffs, supply chain challenges, weaker Chinese demand and a strong Swiss franc, Swiss firms have displayed remarkable adaptability. This helped drive real GDP in Switzerland 1.5% higher in the second quarter of 2026, compared with the first three-months of the year, its fastest pace in almost five years. That performance was led by chemical and pharmaceutical firms rebounding from a series of shocks, and exporters benefiting from a global rise in tech-led investment and demand for high-value goods. In addition to this manufacturing and industrial recovery, business surveys also point to an improving picture in services sectors. We have raised our Swiss growth forecasts to 2.3% in 2026 and 1.5% in 2027.

We have raised our Swiss growth forecasts to 2.3% in 2026 and 1.5% in 2027

Low inflation and healthy public finances

Beyond a solid corporate outlook, Switzerland is also less exposed than other developed economies to current macroeconomic headwinds, including fiscal concerns and the energy shock emanating from the Middle East. With a sizeable domestic hydroelectric and nuclear power generation capacity, Switzerland is less dependent on imported energy and still enjoys low inflation. This advantage is also helped by the strength of the Swiss franc, which curbs imported price pressures.

Headline inflation has picked up somewhat recently, reaching 1.0% year-on-year in September from 0.8% in August and 0.4% in July. A continuation of this trend could prompt concerns. However, we expect average inflation to remain below 1% this year and into 2027. This means we see little chance that the Swiss National Bank (SNB) will be forced to raise its policy rate from the current 0%. This is in contrast to other major central banks which are tightening monetary policy, and we acknowledge that there is an outside risk of a hike by the SNB late in 2026 or in 2027. However, this would represent a limited adjustment, motivated more by the opportunity to regain some policy headroom than a desire to curb inflation.

The SNB also faces less pressure to intervene and cap Swiss franc gains following a slight softening of the currency. A strong franc has been a persistent headwind for the country’s multinational businesses, which must manage Swiss-franc-denominated costs, while generating the bulk of their earnings abroad. The currency performed strongly over the second half of 2025. This year, however, it has weakened somewhat, particularly since June, as investors started pricing in rate hikes in the US and Europe, and concerns over the Federal Reserve’s political independence have faded. 

Policy rate differentials with both the European Central Bank and the Fed are now broad and we see them widening into 2027, exerting some limited downward pressure on the Swiss franc. We expect USDCHF to remain in a 0.81-0.86 range in coming months, with a 12-month forecast of 0.83. For EURCHF our 12-month forecast is 0.95.

Swiss equity valuations are back to historic averages. However, we still see selective opportunities

The yield on the benchmark 10-year Swiss Confederation bond has risen sharply this year, mirroring moves in other developed market economies, to a peak of around 0.66% in late September. We consider this move – and market expectations of nearly three policy rate hikes by the SNB between now and the end of 2027 – excessive. In contrast to current market pricing, we expect long-term Swiss yields to decline, with the 10-year yield settling around 0.30% on a 12-month horizon. We remain neutral overall on global sovereign bonds, and prefer 5-to-7-year maturities in Switzerland.

Selective exposure in Swiss stocks

For equity investors, the improving earnings momentum being enjoyed by Swiss firms now looks largely priced in, and valuations are back to historic averages. However, we still see selective opportunities. Switzerland is home to many world-class companies that offer high levels of innovation, operating in a relatively stable economic and political environment. Forecast dividend yields of 3% over the next 12 months also look attractive, while for Swiss investors, home-market equity exposure helps remove some of the need for currency hedges in portfolios.

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The broadening of Swiss stocks’ appeal

July 29, 2026

Healthcare and financials account for around 60% of the Swiss Market Index, and remain among our preferred sectors globally, but tariff risks have not disappeared. This is a particular concern for the pharmaceutical sector, which makes up around a third of Swiss goods exports to the US, and where President Trump has repeatedly threatened separate and elevated sector levies.

Scope to raise investment

The country continues to demonstrate the adaptability that has long underpinned its economic success

Nor can Switzerland avoid longer-term challenges, including an ageing population and signs that economic momentum may have slowed post-Covid. Domestic demand remains moderate, and there is scope for the country to raise productive investment to support long-term growth. Switzerland’s low public debt and budget deficit, as well as its large current account surplus, give it ample room to do so. Such investments could be directed towards transport network upgrades, easing housing supply pressures, or strengthening strategic security, including in energy and AI. That could, in turn, attract private sector flows.

In the context of today’s geopolitical uncertainties, Switzerland’s place in the world has been the focus this year of two public referendums backed by the right-wing Swiss People’s Party. The first proposed capping the resident population while the second called for a stricter interpretation of Switzerland’s historic neutrality. Both were voted down.

A changing world order, from new trade barriers to demographic and housing pressures, is testing Swiss resilience. Yet the country continues to demonstrate the adaptability that has long underpinned its economic success.