The geopolitical oil price shock caused by the Middle East conflict is slowing down the Swiss economy. Due to rising energy costs and high levels of uncertainty, the KOF is revising its real GDP forecast downward to 0.80% for 2026 (from 1.00%) and to 1.50% for 2027. As a result, the economy is growing below its potential for the time being. At the same time, the inflation forecast for 2026 has been raised to 0.60% due to fuel and energy prices, but remains within the stability range.
In line with this development, the Swiss National Bank left its key interest rate unchanged at 0.00% in its latest economic assessment. The Governing Board concludes that inflation of 0.60% is expected in the medium term and that second-round effects will remain moderate, and sees no need for action. However, to counteract Swiss franc appreciation that hinders exports, the National Bank remains prepared to intervene in the foreign exchange market.
The labor market continues to show signs of stagnation. Due to a lack of economic momentum, the SECO unemployment rate remains unchanged at 3.10%. While the federal government is implementing restrictive austerity programs to comply with the debt brake, cantons such as Zurich and Bern are taking countermeasures. They are using their financial leeway to implement significant tax cuts, which has a supportive effect on purchasing power.
KOF Economic Forecasts
GDP 2026 0.80%
Inflation 2026 0.60%
Key interest rates 0.00%
Sources: Chefinvest, ZKB, SECO
As of: June 24, 2026
Seasonally adjusted gross domestic product (GDP) fell by 0.20% in the euro area and by 0.10% in the European Union (EU) in the first quarter of 2026 compared with the previous quarter. On a year-over-year basis (Q1 2026 vs. Q1 2025), it rose by 0.30%.
Due to the stronger impact of the war in the Middle East on commodity markets and the slowing momentum in economic activity, the European Commission anticipates a weaker economy in its spring forecast. After 1.50% in 2025, GDP growth in the EU is expected to slow to 1.10%—a downward revision of 0.30% compared to the fall forecast (1.40%). The situation is then expected to improve slightly in 2027, rising to 1.40%.
The labor market is stable, and the unemployment rate in the euro area remained unchanged at 6.30% in April 2026.
Annual inflation in the euro area stood at 3.20% in May 2026, up from 3.00% in April. A year earlier, it was 1.90%. Inflation in the euro area is expected to rise to 3.00% in 2026—1.10% higher than previously forecast—and to fall back to 2.30% in 2027.
GDP Growth 2026 +1.10% (E)
EU Inflation 2026 + 3.00% (E)
Current 3-month Euribor + 2.33%
The ECB raised its key interest rate by 25 basis points to 2.25% this month, It was the first increase since 2023, after the war in Iran and the resulting energy shock had driven inflation in the eurozone to 3.20% in May (ECB target: 2.00%).
The global environment now appears somewhat more favorable, as energy prices have fallen following the announcement of the framework agreement, even though they remain above the average levels seen in January and February 2026. Inflation expectations have eased slightly, and the pressure for further monetary tightening has eased somewhat.
The European stock market is proving surprisingly resilient despite inflation risks and weaker growth prospects. During the Q1/2026 earnings season, many European corporations exceeded earnings expectations. Currently, a positive trend in revenue and earnings expectations is emerging for European companies over the next few quarters. Revenue is expected to rise by +10.00% year-over-year in both Q2 and Q3. Earnings are projected to be +14.00% higher in Q2 and +15.00% higher in Q3 compared to the previous year. The expected profit increase for the full year 2026 is +16.00%.
Daniel Beck, Member of the Executive Board
Sources: European Commission, Eurostat, LGT Bank AG
As of: June 23, 2026
According to preliminary estimates, the Flash S&P Global U.S. Composite PMI (Purchasing Managers' Index for the service and manufacturing sectors) rose by 0.7 points to 52.2 points in June 2026 compared with the previous month. This 6-month leading indicator thus signals stronger economic growth again compared to previous months. As a result of the (preliminary) agreement between the U.S. and Iran to end the war, the transport of goods through the Strait of Hormuz will return to normal in the coming weeks, reducing related uncertainties (supply and inflation). According to its April 2026 forecast, the IMF expects the U.S. economy to grow by 2.30% in 2026 and 2.10% in 2027.
In May, 172,000 nonfarm jobs were created, indicating a resilient labor market. The unemployment rate remained unchanged from the previous month at a relatively low 4.30%.
At its meeting on June 16– –17 June 2026, the Fed kept the federal funds rate at 3.50–3.75% despite rising inflationary pressures. The decision was unanimous. Under the new Fed Chair, Kevin Warsh, more cautious communication (forward guidance, such as the dot plot projections of meeting participants’ interest rate expectations) is expected in the future. The market now anticipates not a cut, but a 0.25% increase in the federal funds rate by the end of the year. U.S. inflation rose to 4.20% in May (+0.40% from the previous month), and core inflation (excluding energy and food prices) rose to 2.90% (+0.10%).
Earnings reports for the S&P 500 companies clearly exceeded forecasts with an impressive 28.00% year-over-year increase. Expectations for the second-quarter 2026 earnings reports are also well above the historical average, with growth projected at 22.00%. The current stock market valuation is thus supported by solid earnings growth. With an S&P 500 price-to-earnings ratio of 20.4 (based on analysts’ earnings estimates for the next 12 months), the market valuation has declined in recent months, but it remains above the 5-year average of 20.1 and the 10-year average of 18.9.
GDP 2026 (IMF): +2.30%
Inflation 2026 (IMF): +3.20%
Fed Funds Rate: +3.50–3.75%
Sources: Trading Economics, FuW, U.S. Bureau of Labor Statistics, Statista, IMF, FOMC
As of: June 24, 2026
By mid-2026, the Chinese economy will show a marked divergence, with real economic growth experiencing a structural slowdown. Following a rate of approximately 5.00% in the previous year, international institutions are forecasting GDP growth of 4.40% to 4.80% for the full year. This keeps the country just at the lower end of the government’s official target range. A significant divergence is evident in prices: The producer price index rose to its highest level in nearly four years due to factors related to the war and supply chain disruptions. Consumer prices, however, remained unchanged at 1.20%. Liquidity in the Chinese economy remains high, and foreign exchange reserves reached a multi-year high of 3.44 trillion U.S. dollars. Nevertheless, the limited scope for passing on price increases in the domestic market is significantly eroding margins in traditional retail. The export-oriented high-tech sector and industrial production are thriving despite Western tariffs and are able to offset the pressure through record exports to the Global South. Domestic consumption, on the other hand, remains mired in a deep crisis.
The main challenges stem from the ongoing weakness of China’s consumer goods and real estate sectors. The unsettled middle class is increasingly allocating its capital to defensive savings rather than consumption, as illustrated by the sharp slowdown in sales growth during the flagship “618 Shopping Festival.” In contrast, the advanced manufacturing sector is proving highly resilient in key technologies such as wind turbines, industrial robots, and e-mobility, and is posting record global trade surpluses.
IMF Forecasts
GDP 2026 4.50%
Inflation 2026 1.20%
Shibor 1.43%
As of June 24, 2026
The Japanese stock market remains one of the most attractive regions for long-term investors in 2026. After decades of weak growth, the corporate landscape has undergone a lasting transformation. Companies are focusing more on profitability, returns on capital, and shareholder-friendliness. Share buybacks, dividend increases, and more efficient capital allocation are now an integral part of many corporate strategies.
This trend is supported by Japan’s continued moderate inflation. After years of deflation, companies are increasingly able to pass price increases on to their customers. At the same time, wages are rising, which supports private consumption and stimulates the domestic economy.
Another key driver remains the geopolitical realignment of the global economy. Many international companies are diversifying their supply chains and seeking alternatives to China. Japan benefits from this trend as a technologically advanced and politically stable location. Japanese companies hold leading global market positions, particularly in the fields of semiconductors, automation, robotics, and industrial precision technology.
Valuations also continue to appear attractive. While many U.S. technology stocks are trading at high valuations, numerous high-quality Japanese companies continue to trade at a discount to their international competitors despite strong balance sheets and solid growth prospects.
Risks include, above all, a sharper appreciation of the yen, a global slowdown in growth, or a more significant tightening of monetary policy by the Bank of Japan. Overall, however, we believe that the structural opportunities continue to outweigh the risks.
Expected GDP 2026 0.60%
Expected inflation 2026 2.10%
Japanese Policy Rate 0.64%
Mimi Haas, Lic. rer.pol. HSG, M.A. in Banking and Finance HSG, Partner
Sources: OECD, Bank of Japan, and IMF
As of: June 22, 2026
The stock market environment remains positive, but not for the reasons one would hope for in an ideal world. It’s not falling interest rates that are driving the markets, but robust earnings growth—and this growth continues to be concentrated primarily in the U.S. and in those market segments that benefit directly or indirectly from the expansion of AI infrastructure. So the good news is: Fundamentally, the bull market isn’t on thin ice. The less romantic news: It isn’t driven by cheap money, but by the need to continue delivering profits.
BlackRock and Citi, in particular, are emphasizing this point very clearly. The market is currently grappling with the conflict of interest between higher interest rates and strong earnings growth. As long as earnings growth remains strong enough, it can offset the valuation pressure from higher interest rates. This is exactly what has been observed so far, particularly in the U.S. technology sector. There, earnings growth is so robust that even a more restrictive interest rate outlook has not been enough to undermine the fundamentals of stock price performance. In other words: Tech stocks are expensive, but so far at least for a challenging—rather than a completely absurd—reason.
UBS and Deutsche Bank also essentially reach the same conclusion, albeit with slightly different emphases. UBS highlights the persistently strong earnings growth in the U.S. and the structural support provided by the AI capital expenditure cycle. Deutsche Bank also remains constructive on equities but places greater emphasis on the side effects of the current environment: higher energy prices, geopolitical uncertainty, and an inflation picture that leaves central banks little room for a truly comfortable easing path. This is not a contradiction, but rather a sober division of labor: Some explain why the market is rising, while others remind us why it may still be unsettling.
Regionally, the overweight position in the U.S. remains the most compelling call. The U.S. market continues to combine the strongest earnings momentum, the highest visibility in AI investments, and the broadest range of structural winners in the capital markets. Citi has raised its price target for the S&P 500 to 8,100 points, and other firms also remain positive due to earnings growth. That doesn’t mean valuations are harmless. But the market is currently willing to tolerate high valuations as long as earnings are rising fast enough. For many investors, this isn’t an ideal rationale, but as we all know, in the stock market, you don’t have to like what works.
Emerging marketsalso remain overweight>, particularly where valuations, economic momentum, and AI hardware exposure converge. Asian markets, in particular, benefit from the fact that they constitute essential parts of the global AI supply chain. At the same time, they often offer more attractive valuations compared to the U.S. This makes emerging markets an interesting complement to a portfolio’s U.S. bias: less expensive, but by no means out of step with the theme.
The outlook for Japan remains neutral. Fundamentally, the market looks solid, primarily due to technology, export quality, and banks. At the same time, Japan’s monetary policy environment is no longer quite as accommodative as in previous years. The tailwind from ultra-loose monetary policy is gradually subsiding, and that is precisely why Japan is more of a solid portfolio component than the most obvious performance driver. For Switzerland , a neutral to slightly positive assessment is also appropriate. Swiss stocks remain high-quality, defensively stable, and useful as a portfolio stabilizer in a volatile global environment. However, they currently represent more of an answer to the question of robustness than to the question of maximum performance. That’s not particularly exciting, but as we know, the majority of truly useful portfolio components are rarely exciting.
Europe ex-Switzerland remains underweight, as does the UK in relative terms. The reason for this is less a fundamentally negative view of European stocks than the weaker combination of earnings momentum, economic momentum, and structural growth. Europe is more attractively valued, and that is precisely why there are repeated attempts to automatically derive a stronger investment recommendation from this. Unfortunately, attractive valuations alone have never reliably ensured that companies grow faster. Europe thus remains a market for stock picking, not for heroic beta.
At the sector level, technology—specifically AI infrastructure —remains the most important overweight. This primarily includes semiconductors, hardware, data center infrastructure, power and grid-related themes, as well as select large platform companies. The thesis is simple: The expansion of AI infrastructure is not short-term hype without capital requirements, but a real investment cycle with real winners. That is precisely why the sector remains fundamentally leading. At the same time, this is also the area where positioning is the most concentrated. In other words: being structurally correct does not protect against tactical pain. Investors in this sector should therefore aim to be right, but not expect a straight-line trajectory.
A second Overweight recommendation applies to quality financials, particularly select banks. Higher interest rates, robust balance sheets, and solid earnings structures continue to support parts of the financial sector. Unlike in previous cycles, the sector this time does not appear to be merely a lever for economic optimism, but in many cases a genuine beneficiary of a prolonged environment of elevated interest rates. This does not automatically make banks glamorous, but glamour has rarely been a reliable investment strategy anyway.
A third Overweight recommendation applies to healthcare equipment and other quality defensive stocks. Here, attractive valuations, solid fundamentals, and lower dependence on day-to-day macroeconomic drama argue for a higher weighting. Especially when compared to very expensive growth segments, such sectors offer a useful counterbalance in the portfolio. In a sense, they serve as a reminder that even on the stock market, not every good idea has to end with semiconductors.
On the underweight side, broad European cyclicals remain unattractive. Higher energy prices, tighter profit margins, and weaker economic momentum are putting these segments under greater pressure than their counterparts in the U.S. or in select emerging markets. Investors looking to bet on Europe should therefore take a selective rather than a broad-based approach. Energy-dependent consumer segments also remain underweighted. In an environment where real purchasing power, input costs, and financing conditions can all come under pressure simultaneously, the risk-reward imbalance there is not very appealing. There are more appealing areas in the market to buy cyclical risk.
Tactically, part of the overcrowded tech segments also warrants a relative underweight position, although the long-term structural case remains positive. This is not a fundamental contrarian call, but rather a matter of market technique. When everyone owns the same good thing at the same time, the fundamentals don’t go wrong—but the risk-reward ratio becomes significantly less favorable. The market has the unpleasant tendency to truly love good news only after it has long been priced in.
Strongest earnings momentum, high visibility in the AI investment cycle, broad capital market leadership
Attractive valuation, favorable macro dynamics, strong AI hardware exposure
Defensive quality anchor, stabilizing portfolio function
Good fundamentals, but less monetary policy tailwind
Weaker earnings and economic momentum, lower structural momentum
Relatively weak regional profile compared to the U.S. and EM
Structural beneficiary of the global AI capex cycle
Robust earnings; interest rate environment supports margins and profitability
Attractive valuations, stable fundamentals
Higher energy dependence, weaker margin dynamics
More vulnerable to cost and demand pressures
Overbought and heavily positioned, despite a positive long-term outlook
Source: MarketMap, Chefinvest, UBS, WisdomTree, Citi Wealth, Deutsche Bank
As of: June 23, 2026
The performance of government bonds continues to be largely determined by the monetary policies of the major central banks. After markets had anticipated further interest rate cuts for much of the year, the European Central Bank has recently adopted a more restrictive stance and raised key interest rates once again. This move is driven by persistent inflation risks and concerns that inflation could prove more stubborn than originally expected. The Federal Reserve, on the other hand, has left key interest rates unchanged and continues to pursue a data-dependent approach.
This results in a mixed picture for government bonds. Higher interest rates continue to provide attractive current yields, but at the same time, rising rates limit price appreciation potential, particularly for long-term bonds. U.S. Treasuries continue to offer attractive real yields and fulfill their role as a diversifier during periods of heightened market uncertainty. In Europe, government bonds from countries with high credit ratings are benefiting in particular from their role as safe havens, while bonds from peripheral countries continue to offer yield advantages but remain more dependent on political and fiscal developments.
Overall, government bonds remain an important component for stabilizing portfolios. The significantly higher yields compared to previous years once again offer investors attractive return opportunities, even though the environment remains challenging due to uncertainty about the future course of monetary policy.
Investment-grade bonds continue to show resilience. Most issuers have solid balance sheets, stable cash flows, and good access to capital markets. Despite higher interest rates, refinancing risk remains manageable. Credit spreads continue to hover at historically low levels, reflecting the overall robust condition of companies. While this limits additional price appreciation potential, current yield levels continue to offer attractive current income. In our view, European investment-grade bonds in particular represent an interesting combination of stability and yield and remain an important component of the defensive portion of the portfolio.
The high-yield segment continues to offer attractive yields, albeit with an increasingly limited risk premium. Credit spreads are tight by historical standards and leave little room for disappointment. While issuers with good credit quality in the BB range continue to demonstrate solid fundamentals, pressure is mounting on weaker borrowers with higher leverage ratios. Default rates are likely to rise moderately in the coming quarters but are expected to remain below long-term averages. Accordingly, we continue to favor high-quality high-yield issuers and view the segment primarily as a selective addition to a broadly diversified bond portfolio.
Emerging market bonds generally benefit from attractive yield levels and interest rate cut cycles that are already well underway in many countries. At the same time, geopolitical tensions, a stronger U.S. dollar, and political uncertainties in certain regions have recently heightened risk perceptions. While the yield premiums appear attractive at first glance, in our view they do not currently sufficiently compensate for the additional political, currency, and liquidity-related risks. We therefore remain cautious on emerging-market bonds and currently favor higher-quality bond segments in developed countries.
Conclusion: Bond markets continue to operate in an attractive environment. While the European Central Bank continues its cycle of interest rate cuts, the Federal Reserve is taking a more cautious approach due to the robust economy and persistent inflation risks. As a result, yields remain at attractive levels, particularly in the U.S.
In our view, government bonds and investment-grade bonds currently offer the most compelling risk-return profile. They provide attractive current yields while once again fulfilling their traditional role as anchors of stability and diversifiers within the portfolio. In the high-yield segment, we remain selective due to tight credit spreads and favor high-quality issuers. Emerging-market bonds, on the other hand, currently appear less attractive, as the additional yields do not sufficiently compensate for the political, currency, and liquidity-related risks.
Overall, we remain constructive on the bond segment. After many years of low interest rates, bonds can once again make a significant contribution to portfolio returns while also enhancing stability in a market environment characterized by geopolitical uncertainties and economic risks.
Mimi Haas, Lic. rer.pol. HSG, M.A. in Banking and Finance HSG, Partner
Sources: MarketMap, Bloomberg, and DWS
As of: June 22, 2026
The euro has recently seen only a limited recovery against the U.S. dollar. While the European economy is showing initial signs of stabilization, the U.S. dollar continues to benefit from the comparatively robust U.S. economy and higher interest rates in the United States. The Federal Reserve is also signaling a cautious stance on further interest rate cuts, which maintains the dollar’s interest rate advantage over the euro for the time being.
For investors, the dollar thus remains attractive despite its high valuation. At the same time, a slowdown in U.S. growth or a looser monetary policy by the Fed later this year could lead to a gradual weakening of the dollar.
Conclusion (12 months): The dollar is likely to remain structurally supported; sustained euro strength is only to be expected with a clear growth recovery in Europe—overall, a slightly USD-positive bias with increased volatility.
The Swiss franc maintains its role as a classic safe-haven currency. Uncertainties related to geopolitical conflicts, as well as Switzerland’s continued solid economic and fiscal situation, are supporting the franc against the euro.
At the same time, the Swiss National Bank has completed its cycle of interest rate cuts. This reduces interest rate-related pressure on the franc. Although the euro remains relatively stable against the franc, significant appreciation potential is currently limited.
Conclusion (12 months): The franc remains structurally strong; EUR/CHF is likely to remain within a narrow range, with clear periods of CHF appreciation during times of stress.
The USD/CHF currency pair brings together two of the most sought-after currencies of the moment. On the one hand, the U.S. dollar benefits from higher yields and the strength of the U.S. economy; on the other hand, the Swiss franc remains in demand due to its safe-haven characteristics.
Accordingly, the currency pair is caught between interest rate differentials and risk aversion. In the short term, higher U.S. interest rates favor the dollar, while in the medium to long term, the franc’s structural strength is likely to come more into focus.
Conclusion (12 months): A slightly USD-positive underlying trend due to the interest rate differential, but with recurring periods of CHF strength—overall, a volatile sideways pattern with a slight advantage for the USD.
Mimi Haas, Lic. rer.pol. HSG, M.A. in Banking and Finance HSG, Partner
Sources: MarketMap and Bloomberg
As of: June 22, 2026
As a result of the (provisional) U.S.-Iran agreement to end the war, the WTI oil price has fallen sharply to 73 USD per barrel. Just in time for the summer vacation-driven driving season in the U.S.
However, for the oil price to drop to its pre-war level of $60–$65 per barrel, shipping through the Strait of Hormuz must return to normal, which is expected to take 2 to 3 months.
The lifting of U.S. sanctions on oil shipments from Iran—scheduled to take effect 60 days after the U.S.-Iran agreement—will further increase supply and help prevent potential bottlenecks.
However, the geopolitical risks surrounding the (provisional) U.S.–Iran agreement—and thus the adequate supply of oil to the global economy—will remain until a definitive agreement is reached.
Sources: OPEC, FuW, MarketMap, International Energy Agency (IEA)
As of: June 24, 2026
Gold continues to trade at elevated levels, but is currently exhibiting significantly higher volatility. This is driven in particular by the escalation in the Middle East, which has led to sharper downward price fluctuations in the short term.
At the same time, a more complex macroeconomic environment is emerging: The conflict increases the risk of rising energy prices and, consequently, renewed inflationary pressure. This could limit or delay central banks’ scope for further interest rate cuts, which would generally weigh on gold. As a result, the precious metal is currently caught between geopolitical support and potentially higher real interest rates.
However, structural demand remains intact. Central banks continue to buy gold to diversify their reserves, and during periods of heightened uncertainty, demand for safe-haven assets rises further. Supply, on the other hand, responds only to a limited extent, which can amplify price movements.
Overall, market positioning has become more dynamic without yet being overheated, leaving room for further movements in both directions.
Mimi Haas, Lic. rer.pol. HSG, M.A. in Banking and Finance HSG, Partner
Sources: Degussa, Reuters, and the Financial Times.
As of June 22, 2025
United Kingdom