2026 Outlook: Swiss equities

Summary

• The global backdrop is improving as growth normalises, inflation eases, and policy clarity returns, creating a more constructive environment for selective equity investing.

• Swiss equities remain well supported, with strong balance sheets, innovation depth and a long history of disciplined capital allocation across large-caps and SMID.

• FX headwinds are masking underlying strength, and even modest stabilisation could allow organic growth − especially within SMID − to reassert itself.

• Management change and strategic repositioning across several Swiss corporates offer potential catalysts for 2026, complementing a broader theme of ‘quality growth priced for non-growth’.

• Our positioning favours resilience and selectivity, through disciplined valuation work, diversified performance drivers and a focus on high-quality franchises capable of compounding through uncertainty.

As we look toward 2026, the global economy appears to be entering a “Goldilocks” phase – one that is neither overheating nor stalling. Early signals indicate steadying momentum: global trade tensions are easing, and Europe may be showing its first genuine signs of acceleration after years of structural constraints. As policy clarity improves, investor sentiment is strengthening, creating an environment where selective opportunities can be captured with conviction.

Within this context, Switzerland continues to stand out for the depth and resilience of its corporate sector. While large caps remain reliable anchors, we see many compelling opportunities in the small- and mid-cap (SMID) universe, where valuation dispersion, innovation and operational agility remain pronounced. Strong balance sheets, high-quality management teams and a long tradition of disciplined capital allocation position Swiss companies – across the market-cap spectrum – to navigate a more complex global landscape.

FX headwinds masking underlying fundamentals

Foreign exchange remains a central theme in Swiss equities. The persistent weakness of the US dollar has weighed on export-oriented Swiss champions, masking the underlying strength of many business models. Even a modest stabilisation should relieve pressure and reveal the strong organic growth many firms consistently generate. 

Strategic catalysts: trade, leadership change and corporate agility

A potential trade agreement between Switzerland and the US could deliver meaningful upside, although uncertainty about its timing may introduce short-term demand volatility. In this environment, we see strategic opportunities: Swiss companies may expand their US exposure through targeted acquisitions, thereby bolstering revenue diversification and competitive positioning. An unusually high number of management changes in 2025 could also act as a catalyst, as new leadership teams look to reset priorities, strengthen operational focus and rebuild investor confidence into 2026.

Quality growth: mispriced and misunderstood

Our investment approach focuses on identifying companies with durable competitive moats and resilient business models, rigorously stress-testing quality to ensure adaptability across market conditions. Scepticism has grown regarding the outlook for ‘quality growth’, with concerns that such businesses may have moved beyond growth and could face ongoing valuation pressure if earnings disappoint. We think this view risks underestimating the resilience of high-quality business models. As growth normalises, we expect earnings and valuations for well-positioned companies – including several in the SMID universe – to expand, rewarding patient investors. In a yield-starved Swiss equity market, ‘dividend aristocrats’ remain particularly compelling for their stable income, resilience and compounding potential. We love to use the slogan “earn while you wait, grow while you sleep” for such names.

Navigating risks with discipline and diversification

Nonetheless, risks remain ever present and require close monitoring. Commodity and technology supercycles raise questions about durability and the possibility for abrupt reversals. Asset bubbles in areas such as real estate, technology, and alternative investments could create sudden dislocations. AI-driven disruption is a powerful yet unpredictable force, capable of reshaping competitive dynamics at speed. K-shaped recovery patterns could advantage select regions or industries while leaving others behind, producing uneven returns. Europe’s recovery trajectory also remains uneven; despite ongoing stimulus and reform efforts, slow adjustment in major economies continues to limit the continent’s ability to fully benefit from global momentum.

As 2026 approaches, our strategy emphasises discipline, clarity, and diversification. We continue to stress-test each company’s competitive moat and assess its ability to return to sustainable growth. Valuation discipline remains essential, guiding us toward opportunities the market may be underappreciating – particularly within the SMID universe, where dispersion is still elevated. 

With diversification across multiple performance drivers, we aim to manage uncertainty while positioning our portfolios to capture upside in a shifting global landscape. This balanced framework supports long-term resilience and strengthens our conviction in identifying high-quality Swiss opportunities for patient investors.

Stock insights: catalysts across the capital structure

NB: The companies referenced in this insight are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. The information provided is to illustrate our current investment activities and approach only, and should not be construed as offer, research or investment advice. Past performance and other indicators or metrics do not predict future outcomes. Please read important information at the end of this communication.

We have observed that select companies are set to benefit from management team rejuvenation and potential strategic catalysts, such as Nestlé and Tecan. After several governance missteps, Nestlé strengthened its leadership with a high-profile chairman, Pablo Isla (formerly CEO of Inditex), and a new CEO appointed from the internal talent pool. Nestlé should swiftly address past shortcomings and refocus the group on attractive categories. Divestments of non-core product lines, alongside targeted investment to accelerate growth in strategic categories, should lift Nestlé’s organic growth prospects. A rigorous cost-cutting programme supports efforts to grow and leverage its operating capital base. 

Meanwhile, Swiss diagnostics equipment firm Tecan is weathering several headwinds – from weakness in the Chinese market to US tariffs and reduced US government healthcare research budgets. While we assess current headwinds as transitory and a base from which to grow, the new leadership team should regroup and refocus the company to sharpen its strategic focus and capture future growth opportunities.

For the category of ‘quality growth priced for non-growth’, we would highlight Sika in the large-cap space, and Straumann among the small- and mid-caps. Sika, a longtime growth darling for Swiss investors, is battling with weakening market trends in the construction chemicals market, most notably in China. Although Sika continues to outperform its competitors, organic sales growth rates have dwindled to low single digits and turn negative once adverse currency effects are taken into account. Sika is actively managing its cost base to address reduced growth prospects in the short term. 

Straumann’s strong track record of solid, double-digit organic sales growth has been temporarily overshadowed by significant adverse effects from the weak US dollar and Brazilian real, as well as modest growth in the US. Its innovation leadership in the global dental implant market should, in our view, put the company in a strong position to accelerate growth, courtesy of lower US interest rates and Chinese policy interventions that favour Straumann’s product range. 

While many investors remain cautious on financials, we see strength in Partners Group’s and Cembra’s business models. The former focuses on private-market solutions and has become a key partner for major private wealth groups. While there is some concern about the excesses in the area and the reduced prospects of earning high fees, we see value in Partners Group's conservative investment strategy and its focus as a solution provider. Performance fees are expected to flow more abundantly from 2026 onwards, complementing the 4% dividend yield. 

Cembra offers an even higher yield, although its potential to expand earnings stems from extensive efforts to digitalise the back office and reduce costs. As the only Swiss bank purely active in the private consumer credit markets, Cembra benefits from regulatory specificities in Switzerland, which allow it to build on steady demand and grow through innovative products.

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