Swiss Equity: Outlook 2026
December 2025 | Thomas Funk
For Swiss companies, the past year has been challenging. At the outset there was still hope that the US economy would gain momentum and that the manufacturing sector – led by America – would emerge from its trough.
Things turned out differently. The so-called Liberation Day marked the beginning of a new, fragmented world order shaped by trade conflicts and tariffs. In such an environment, companies around the globe have become hesitant to invest, which has visibly slowed economic momentum.
On Switzerland’s National Day, 1 August, Swiss firms were confronted with new tariff demands of up to 39% by the US – yet another burden which, however, proved manageable for most listed groups. Over decades, Swiss companies have built international production networks and learnt that it is advantageous to manufacture where goods are sold. Experience with a strong franc has forced them to operate with flexibility and efficiency. That adaptability is paying off today.
The currency as a defining factor
In 2025 the Swiss franc appreciated once again, and significantly so. Over the long term, such appreciation broadly mirrors inflation differentials with other economies – but this year it went beyond that. With inflation in Switzerland already back at zero, further upward pressure on the franc has emerged. As only a small share of corporate earnings is generated domestically, the strength of the currency has weighed significantly on profits when translated into Swiss francs.
The latest surge in the franc was driven mainly by the weakness of the US dollar, particularly during the second quarter. Should exchange-rate conditions stabilise in 2026, this base effect is likely to fade by mid-year. Over the past four years, currency fluctuations have repeatedly led to downward earnings revisions – a pattern that now shapes valuations across the Swiss equity market.
Valuations and market dynamics
Internationally expanding quality companies have generally seen a notable compression in valuations, while more domestically focused and less dynamic firms have, in some cases, become more expensive. This divergence creates opportunities for active management, yet valuation gaps alone rarely reverse market trends. The turning point comes when the direction changes – valuations then amplify the move.
For 2026, the key will be to halt the sequence of negative earnings revisions. The precondition for that is a stabilisation of the franc. In real terms the currency remains overvalued, which is likely to increase pressure on the Swiss National Bank to act. Any easing on the currency front would be an important catalyst for a market recovery.
A subdued investment climate – and emerging opportunities
Manufacturing has been struggling for years: investment ratios are low and replacement needs are growing. In both the United States and Europe, large-scale programmes for infrastructure and housing are required. At the same time, labour shortages and rising wage costs are driving demand for automation, while the energy infrastructure is undergoing structural change.
A rise in manufacturing purchasing manager indices could particularly benefit the Swiss small- and mid-cap segment.
Many of these companies possess ready-to-supply capacity, strong product innovation and pricing power – ideal conditions for above-average earnings growth once global demand picks up.
Strength through focus and efficiency
Even in a subdued environment, Swiss firms remain resilient. Strategies aimed at gaining market share and improving efficiency continue to create sustainable value for shareholders. In these disciplines Swiss companies have long excelled. The experience of recent years has sharpened their focus further: high efficiency, solid balance sheets and a consistent culture of innovation.
Should the economic climate improve in 2026, the foundations for above-average profit growth are in place. A combination of a more supportive environment, strong profitability and attractive valuations would favour those companies with structural growth potential.
Thomas Funk is an Investment Director investing in Swiss Small & Mid Cap and Swiss Sustainable Companies strategies at GAM Investments.