The Swiss franc has been regaining ground since early October. In recent months, its weakness was primarily driven by the Swiss National Bank remaining on the sidelines of the global monetary tightening cycle. Widening interest-rate differentials had even gradually turned the franc into a funding currency for carry-trade strategies.
However, this dynamic may now be starting to shift. If inflation continues to pick up in Switzerland, the SNB will have increasingly limited room to keep monetary policy unchanged while other major central banks continue to raise interest rates. The prospect of a rate hike as early as December could therefore gradually gain credibility.
At the same time, political uncertainty is resurfacing across Europe. In France in particular, difficulties surrounding the adoption of the 2027 budget and concerns over public finances have renewed investor nervousness. Such an environment could restore the franc’s traditional appeal as a safe-haven currency.
After its sharp depreciation in recent months, the franc’s recent rebound therefore raises a key question: could the window of franc weakness already be closing?
Markets, and US markets in particular, are set for another eventful week. Tomorrow, the midterm elections will take place, reshaping the balance of power in Congress. The vote comes against an already tense market backdrop, with more than 130 US companies due to report earnings this week.
The outcome appears relatively clear-cut as far as the House of Representatives, the lower chamber of Congress, is concerned, with a comfortable Democratic majority expected to prevail. The real uncertainty lies with the Senate. Just a few weeks ago, the chances of control shifting to the Democrats appeared slim. Since then, however, the probability has risen significantly, moving closely in line with gasoline prices across the country. Purchasing power remains a key concern for American households and rising prices at the pump are directly weighing on Donald Trump’s approval rating, now at its lowest level since his election.
So, what could these elections mean for equity markets? Historically, midterm elections have marked a favourable turning point for stock indices. Once pre-election uncertainty has dissipated, markets have consistently benefited from a sense of relief among investors, rebounding significantly in the weeks that followed. Since 1982, the S&P 500 has gained an average of 15% in the six months following the elections. Could we see a similar scenario this year?
With Donald Trump at the helm, that is far from certain. The US President has threatened to challenge the results in the event of defeat and has pledged to become “Mr Veto” in order to block any new Democratic regulations.
Initial Democratic measures could also unsettle investors, particularly if they introduce a more restrictive regulatory framework for artificial intelligence technologies and the rapid expansion of data centres across the country. Moreover, the pressure on household purchasing power will not disappear overnight, regardless of which party holds the majority, especially if Donald Trump follows through on his suggestion that strikes against Iran could resume after the election.
We therefore recommend patience to investors who may be tempted to take advantage of the recent correction to increase their exposure to US equities. The coming days and weeks could remain volatile... before calm eventually returns and potentially paves the way for a year-end rally.
The French economy unexpectedly contracted in the third quarter, leaving the country on the brink of a technical recession. Economic activity remains under pressure amid higher financing costs, social tensions, and persistent political and budgetary uncertainty.