Swiss Stocks Are Becoming a Haven From AI Fears Roiling Markets
(Bloomberg) — Shares of Switzerland’s ultra-defensive big companies are a bright spot in a tumultuous period for European equity markets.
The Swiss Market Index, which tracks the country’s 20 largest and most liquid stocks, has risen 4.6% this month while its euro-area counterpart, the Euro Stoxx 50, has fallen 3.2%. That outperformance of almost eight percentage points is the most by the Swiss benchmark since March 2020, when investors sought shelter from the shocks of the Covid-19 pandemic.
The gain shows how investors are paring back risk within Europe in the face of rising borrowing costs, skepticism around the artificial intelligence trade and political turmoil in countries like France and Spain.
The three biggest companies have driven the performance. Drugmakers Roche Holding AG and Novartis AG are up 12% and 6.7%, respectively, in October. The world’s largest food company, Nestlé SA, has rallied 10%. The three defensive stalwarts account for all of the benchmark’s advance this month.
Switzerland’s strength mirrors a broader pivot in Europe toward so-called defensives, whose fortunes don’t rise and fall as much with the cycles of the economy. Investors are favoring high-profitability companies with strong balance sheets that are less exposed to rising borrowing costs. The SMI is one of the biggest beneficiaries of that shift, given that Roche, Novartis and Nestlé account for almost half the index’s value.
“Investors like the defensiveness of Swiss stocks and are actively looking for alternatives to the crowded AI trades,” said Damian Burkhardt, head of Swiss equities at EFG Asset Management. “Healthcare was the funding sector for the AI trade and that is reversing now.”
Bank of America Corp.’s latest fund manager survey also showed a sharp improvement in sentiment toward Swiss stocks, with a net 16% of respondents saying it’s their most preferred European equity market.
Shares of smaller index constituents also have gained, with fragrance maker Givaudan SA and dermatology company Galderma Group AG rising the most. Meanwhile, only four stocks in the SMI — all cyclical companies — are in the red this month.
The change in fortunes follows a dry spell for the Swiss index, which is notorious for its limited exposure to this year’s winners in energy and technology. This decade, the SMI has returned 69% in local-currency terms including dividends, underperforming the Euro Stoxx 50, which has doubled.
The rally also reflects investor confidence over SMI companies’ accelerating earnings growth for 2027, which at 10% is set to be almost twice as strong as what is penciled in for this year, according to data compiled by Bloomberg Intelligence.
To be sure, a look at the SMI’s valuation raises questions how much further the rally has to go. The latest boon has pushed the benchmark back into what can be considered expensive territory when comparing to the past decade — both in absolute terms and relative to the Euro Stoxx 50, against which it is the most expensive in almost two years.
The earnings outlook for Switzerland’s export-dependent large-cap stocks has particularly been brightened by the weakening Swiss franc, which now trades versus the dollar at levels last seen in the first half of 2025. The currency also has weakened against the euro over the past seven months, though it’s recovered some of those losses this month as traders sought a hedge against political tensions in the euro area, particularly in France.
Swiss equity performance typically rests on interest rates, the dollar as well as a peaking macro cycle, according to Bank J Safra Sarasin equity strategist Wolf von Rotberg, who upgraded the country to outperform this month.
“All three factors have lately worked in the SMI’s favor,” von Rotberg said. “The roll-over at the beginning of the month came on the back of a peak in US macro momentum and provided the perfect backdrop for a recovery in beaten-up Swiss equities.”
–With assistance from Ran Li and Michael Msika.
©2026 Bloomberg L.P.
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