Swiss equities: Should I stay or should I go?

Investors should stay invested in Swiss equities but become significantly more selective, favoring resilient quality-growth businesses as crowded trades weaken.

• Retail investors, quantitative strategies and hedge funds account for roughly three-quarters of trading volumes, making volatility a structural feature of markets and increasing the value of fundamental analysis.
• The AI investment cycle remains powerful, but investors increasingly require sustainable revenue growth, profitability and attractive returns on capital rather than simply accepting AI-related narratives and large capex announcements.
• The main overlooked macro risk is a simultaneous disruption by Iran and its proxies of the Strait of Hormuz and the Bab al-Mandeb, while relatively low oil and refined-product inventories leave a thinner-than-expected buffer; the base case remains inflationary growth.
• US 2026 earnings-growth expectations have risen from 24% to 29%, while Swiss SPI earnings-growth expectations have increased from 9% to 13% despite substantial foreign-exchange headwinds.
• Swiss small- and mid-cap companies are expected to deliver around 20% earnings growth in 2026, and the portfolio targets 23% return on equity versus 19% for the SPI Extra Index, with lower forward P/E and EV/EBITDA multiples.

Takeaway: Investors should use turbulence to add high-quality compounders at reasonable valuations, while reducing exposure to crowded AI momentum positions whose downside risks increasingly outweigh incremental upside; Swiss small- and mid-caps remain attractive but carry greater volatility and concentration risks.