Investors in Swiss equities should focus on companies with global industry leadership, innovative business concepts, and solid balance sheets. The Swiss market has shown its resilience during the pandemic, and most of the quoted companies harbor significant upside opportunities.
The Swiss market is an export market and, therefore, most of the companies have a heavy export taint. Because of the high technology products provided by Swiss companies, this export dependency is not directly but indirectly related to the wellbeing of EMA. Example: Europe is still the most important trading partner, alongside the U.S. as well as China. Exports to the neighboring state of Baden-Württemberg alone amounted to the same volume as exports to China in 2019. And yet, Baden-Württemberg, unlike Germany, is a key exporter to EMA.
Given the economic backdrop, stock selection is essential. Given their quality and reliance, Swiss companies are normally valued above average. As elevated valuations and a relative high valuation dispersion, we recommend a good mix of defensive underlying assets and cyclically sensitive supplementary securities in portfolios. Also, tactical allocation should a key driver given the disparate macro trends observed.