The Swiss franc under pressure: Daniel Varela’s analysis in Tribune de Genève

A changing monetary landscape.

As central banks gradually adjust their monetary policies and geopolitical tensions show signs of easing, investors are questioning the outlook for major currencies.

Against this backdrop, the Swiss franc, long supported by its safe-haven status, appears to be losing some of its momentum.

Daniel Varela, Chief Investment Officer at Piguet Galland, shares his views in Tribune de Genève.

Why the Swiss franc could continue to weaken

According to Daniel Varela, the Swiss National Bank’s decision to keep interest rates at zero continues to weigh on the Swiss currency.

“Keeping rates at zero has contributed to this trend, while other central banks are becoming more cautious about inflation. [...] As cash holdings in Switzerland are not remunerated, unlike euro- and dollar-denominated assets, and as geopolitical tensions ease, the Swiss franc should continue to depreciate.”

In this environment, he expects both the euro and the US dollar to strengthen against the Swiss franc in the coming months.

Real estate: no risk of a sharp correction on the horizon

Asked about the possibility of a downturn in the Swiss property market, Daniel Varela remains reassuring. Despite elevated prices and years of strong appreciation, market fundamentals remain solid.

“Swiss indicators do not point to an imminent bubble.”

He highlights the shortage of available housing, exceptionally low vacancy rates and the ongoing challenges of increasing supply.

“Switzerland is not building enough housing, and increasing construction will be difficult. [...] It is hard to imagine a significant decline in property prices, even if interest rates were to rise.” 

A resilient Swiss economy despite European headwinds

Si l'environnement économique reste incertain, Daniel Varela conserve une vision relativement constructive pour la Suisse.

« La croissance résiste bien. Je m’attends à une progression du PIB de 1% cette année. »

L'Europe demeure toutefois un facteur de vigilance, notamment en raison des difficultés persistantes de l'industrie allemande.

« Elle souffre depuis la guerre en Ukraine (fin du gaz russe bon marché) et de la concurrence asiatique, notamment chinoise. »

Although the economic environment remains uncertain, Daniel Varela maintains a relatively constructive outlook for Switzerland.

“Growth remains resilient. I expect GDP to expand by 1% this year.”

Europe nevertheless remains a source of concern, particularly due to the persistent challenges facing German industry.

“It has been suffering since the war in Ukraine began, notably due to the end of cheap Russian gas and increasing competition from Asia, particularly China.”

Artificial intelligence: solid fundamentals remain in place

While enthusiasm surrounding artificial intelligence continues to fuel market concerns, Daniel Varela believes the current environment differs significantly from the dot-com bubble of the early 2000s.

“Today, equity valuations are far below the levels seen in the late 1990s. The market is being driven by technology champions (...) that are highly profitable and relatively low in debt.”

In his view, despite investors’ enthusiasm, “it is probably still too early to worry about the bursting of a bubble.” 

Read the full interview in Tribune de Genève (French only).

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