Attractive Swiss investments – SNB rate cuts support markets

Switzerland is internationally renowned as a safe haven for assets and as a safe country to live in, not least thanks to its historically robust economy by international standards. Even if global economic momentum is likely to slow down during 2025, the Swiss economy should be characterised by relative stability compared to other countries over the quarters ahead. This should benefit Swiss investments, especially given the fact that other currencies are often significantly more volatile than the Swiss franc. Switzerland’s currency could also benefit from global trade policy uncertainties, which are set to remain high for some time to come.

In 2024, Switzerland once again generated more economic growth than the Eurozone, clearly outstripping the growth figures posted in Germany in the process. The German economy, which found itself in recession in 2023 with its gross domestic product falling by -0.3% relative to the previous year, also showed no significant improvement during 2024. After posting growth of just +0.4% in 2023, the Eurozone economy was likewise hardly able to report any economic growth of note in 2024 compared to the prior 12-month period. By contrast, the Swiss economy, which had already registered growth of almost +1.0% in 2023, is set to finally publish year-on-year growth of approximately +1.3% for 2024.

Similarly good growth could also be achieved for the current year, as the Swiss National Bank was the first of the Western central banks to cut interest rates and the real incomes of Swiss households are improving thanks to falling inflation. This should also boost Swiss real estate, which has already distinguished itself over past decades with strong value retention compared to real estate markets in other countries.

Switzerland’s inflation is the lowest among all OECD countries. What is more, Swiss inflation has fallen more than the market consensus had expected in recent months. Swiss inflation could soon trend towards 0.2% or lower, as the strong Swiss franc keeps the prices of goods imported into Switzerland low. This makes it easier for the Swiss National Bank to cut interest rates further.

With financing becoming more affordable as a result, Swiss investments, i.e. real estate, equities and bonds, should receive more support going forwards, even if the development of some relatively strongly capitalised companies also plays a role in the short term – which is why mid-cap Swiss equities represent an interesting addition.

Another positive factor worth mentioning is the steady hand of Swiss monetary policy. An analysis of economic activity fluctuations in various countries since the beginning of the financial crisis in 2007/2008 reveals that the Swiss economy is markedly less volatile than its US or Eurozone counterparts. For a small, open economy, this represents an exception rather than the rule, as one would expect it to be more exposed to the movements of the larger economies. 

The stability of the Swiss franc is based on three factors. Firstly, inflation in Switzerland is less prone to volatility than in other countries, partly because the country’s trade unions are less aggressive, leading to greater industrial peace and no strikes. Secondly, the Swiss National Bank pursues a prudent monetary policy and adjusts interest rates in a timely manner. In contrast, the US Federal Reserve has been slow to implement rate changes over recent years, while the European Central Bank even raised interest rates in 2008 and 2011 when the US financial crisis and euro crisis clearly required rate cuts. And thirdly, Swiss bonds and, of course, the Swiss franc have exhibited lower volatility than other bond markets and currencies for many years.

Conclusion: a more robust economy compared to other countries as well as stable political conditions, less volatile bonds and equities and a clearly stable currency when viewed over the long term make Swiss investments, including real estate, attractive to investors both at home and abroad. The steady hand of the Swiss National Bank with early interest rate cuts also provides support to Swiss investments. 
 

Contact a client advisor for more information.

_{This publication is intended for information and marketing purposes only, and is not geared to the conclusion of a contract. It only contains the market and investment commentaries of Maerki Baumann & Co. AG and an assessment of selected financial instruments. Consequently, this publication does not constitute investment advice or a specific individual investment recommendation, and is not an offer for the purchase or sale of investment instruments. The future performance of investments cannot be inferred from past price performance. In other words, the value of investments may increase but may also decrease, and the investor may be required to make additional payments for certain products. In certain circumstances, figures may refer to reporting periods of less than five years, which could reduce their validity. Predictions for the future are always non-binding assumptions. Figures presented in foreign currencies are also subject to exchange rate fluctuations, which can affect their performance. The information in this publication is in no way to be understood as an assurance of future performance. Maerki Baumann & Co. AG does not provide legal or tax advice. In addition, Maerki Baumann & Co. AG accepts no liability whatsoever for the content of this document; in particular, it does not accept any liability for losses of any kind, whether direct, indirect or incidental, which may be incurred as a result of using the information contained in this document and/or arising from the risks inherent in the financial markets.}

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Editorial deadline: 7 March 2025

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