Swiss Equities in Focus#
UBS Switzerland AG has recently expressed a positive outlook on Swiss equities, especially following a market correction. The firm highlights the quality of companies within the Swiss Market Index (SMI) and their defensive characteristics as key advantages in light of ongoing geopolitical tensions, particularly related to the US-Iran conflict.
Valuations and Profitability#
According to UBS, the forward price-to-earnings ratio for the SMI is approximately 16 times, which is slightly above its long-term average of 15.8 times. This suggests that the market is reasonably valued, especially as corporate profitability among SMI companies has reached record highs. Additionally, the Swiss equity market offers a sustainable dividend yield exceeding 3%, making it attractive in a low-interest-rate environment.
Earnings Growth and Currency Effects#
Last year, SMI companies experienced flat overall earnings growth, primarily due to currency losses that offset operational gains. However, UBS anticipates that these negative currency effects will significantly ease from the second quarter of 2026 onwards, which could positively impact earnings.
Economic Outlook and Investment Themes#
UBS expects a gradual improvement in the global economic outlook later this year, aided by lower interest rates and supportive fiscal policies. The firm has set a central scenario target of 14,000 for the SMI by December 2026, with a current index level of 12,421. UBS identifies potential growth in corporate profits and dividends, particularly in the longevity sector and among companies embracing digitalization and energy transition. The firm recommends focusing on quality companies, profitability leaders, and selected mid-cap stocks, emphasizing the appeal of attractively valued yield stocks with dividend growth.