We were honoured and privileged to be invited here to Berne to speak about the economy and showcase Mirabaud's expertise to several members of the Swiss parliament.
It's an opportunity to put forward all the good things we think about Switzerland.
If there's one idea that's shared by everyone (the word isn't too strong), it's that Switzerland is beautiful. Magnificent landscapes in the mountains, near lakes and in many typical towns.
The country's economy is stable, with extremely low unemployment, a strong currency and inflation below the central bank's mandate. In short, an ideal picture that would make many nations green with envy.
The only problem is that, in terms of stock market performance, the Swiss index has so far been one of the worst in Europe.
However, 2024 could prove to be a totally different story, for the "Swiss model" is not dead:
1 - The adaptability of Swiss companies, which are forced to adapt constantly, never letting their guard down, and constantly striving to remain competitive.
2 - The ability to adapt is also rooted in Swiss culture. Perhaps it's because we change heads of government every year. This culture is also reflected in a savings rate that is historically high enough to cope with more uncertain times. Anticipating darker days without actually facing them.
3 - The Swiss labor market has a relatively good handle on cyclical shocks, thanks to its macroflexibility (a country's ability to recover from a recession without seeing its unemployment rise too much).
Immediate short-time working is also a feature of the Swiss economy during a "major" crisis.
4 - Almost continuous dialogue between unions and employers.
According to a World Economic Forum report on global competitiveness, Switzerland is the country where relations between employers and employees are the most collaborative.
Last but not least, the SNB plays a crucial role. Unlike the ECB (price stability), the Swiss National Bank's mandate is to conduct a monetary policy designed to ensure that the currency retains its value (thus preventing inflation from rising too much) and that the economy can develop optimally.
While the SNB has historically clung to the interest-rate differential with its neighbors (i.e. the eurozone), it seems that the coronavirus crisis has left it unmoved, as demonstrated by its latest meeting when the monetary institution did not raise its rates, unlike the ECB...
Thanks to the ECB, we can therefore look forward to a year 2024 in which the Swiss franc's volatility is "under control".
As for the Swiss index in 2024, there are many arguments in favor of a rebound, including the following:
- Solid fundamentals for the Swiss economy
- The one-offs will fade (indeed, the index was impacted in 2023 mainly by the poor performance of Roche and Nestlé).
- More attractive valuation of Swiss equities by historical standards
- A gradual recovery in the global economy and in Switzerland's main trading partners
- Stabilization of the CHF against the EUR and USD in particular
- Increased investment in infrastructure
- Solid earnings for blue-chip companies and small & mid caps
- Continued inflows into Swiss funds, particularly in the face of geopolitical uncertainties.
In conclusion, ever since the Swiss real estate crisis of the late 80s, analysts have been cautious, even negative, about the (future) growth of the Swiss economy. However, over the past 30 years, growth forecasts have always been revised upwards.
The same will be true for 2024. Remember that the Swiss economy is like a reed: it bends, but does not break. The same will be true of the SMI.
