Recent developments in the Middle East, notably the military ceasefire followed by the decision by the United States to block the Strait of Hormuz in order to exert pressure on Iran, continue to fuel tensions. However, the determining factor now lies in the resumption of dialogue between the parties, which appears to be paving the way for an agreement, even if only partial, aimed at containing, or even bringing a lasting end to hostilities.
The search for a resolution to this conflict is likely to be lengthy and fraught with uncertainty, but this momentum is materially improving short-term visibility and reinforcing the scenario of a gradual de-escalation. In this context, maintaining a defensive positioning, and particularly an underweight stance on equities, appears less justified. We have, moreover, recently increased our exposure to equities once again.
This change in portfolio allocation reflects a gradual normalization of the markets, while preserving heightened vigilance in the face of an environment that remains uncertain.
The year 2026 began on a favourable note for Swiss equities, supported by a gradual improvement in the economic environment. Market sentiment eased significantly following the removal of the 39% tariffs previously imposed on Swiss goods exported to the United States. Indeed, Washington’s decision provided substantial relief to exporting companies, triggering a notable expansion in valuation multiples. Benefiting from valuations more aligned with their fundamentals, Swiss risk assets thus experienced a meaningful catch-up at the start of the year.
The war in Iran, the impact of which extends well beyond the regional geopolitical sphere, is now casting a shadow over this constructive backdrop. The fragility of Swiss growth could intensify should the conflict become protracted. The surge in oil prices is rekindling inflationary concerns, a risk that may weigh on both consumer spending and industrial activity in the coming months.
Another factor to monitor closely is the persistent appreciation of the Swiss franc. After a period of relative stability, it has strengthened again, particularly against the euro, potentially eroding the competitiveness of export-oriented companies, a key pillar of the economy.
Despite these headwinds, which may be temporary, the microeconomic prospects remain broadly constructive. Earnings expectations have not undergone significant upward revisions since the removal of US trade barriers, leaving ample room for positive surprises in upcoming earnings releases.
In this highly uncertain environment, we continue to overweight small and mid-cap stocks. Rich in companies primarily focused on the domestic market, this segment remains relatively insulated from currency fluctuations and international tensions. In short, its strong exposure to the domestic economy constitutes a key advantage in navigating a more complex global environment.
The Consumer Price Index rebounded sharply in the United States in March, with headline inflation reaching 3.3% on an annualized basis. While this uptick was anticipated, driven by a significant increase in energy prices, core inflation remained contained at 2.6%, which reassured investors.