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Investing.com -- UBS expects Swiss equities to maintain positive earnings growth despite challenges from US trade policies and a weak dollar weighing on the global economy.
The investment bank forecasts 4% profit growth for the Swiss Market Index (SMI) in 2025 and 5% in 2026, according to a UBS report released Thursday. With a sustainable dividend yield exceeding 3%, Swiss equities appear attractive in the current low interest rate environment.
The third-quarter corporate results season is underway, with UBS anticipating "decent" earnings ahead. Companies sensitive to economic developments still lack positive momentum from macroeconomic indicators, though conditions have not significantly worsened.
Currency effects driven by a weak US dollar represent a significant headwind this year. Defensive companies are expected to report robust trends overall, while consumer staples companies have been struggling to achieve meaningful volume growth.
The pharmaceutical sector has been in focus following new 100% US tariffs imposed on October 1. However, US President Donald Trump recently announced a surprising deal with Pfizer to delay these tariffs, which investors viewed as reducing tariff and product pricing risks. Additional company-specific pharma deals with the Trump administration are likely in coming weeks.
UBS recommends investors focus on quality firms and service companies in telecommunications, healthcare, and consumer staples sectors, as well as select mid-caps and cyclicals. The bank’s preferred investment theme is "attractively valued yield stocks with dividend growth."
The SMI’s forward price-to-earnings ratio is currently modestly above its historical average. UBS has set a December 2025 target of 12,800 for the index and a June 2026 target of 13,200.
In an upside scenario, the SMI could reach 14,000 by June 2026 if the global economy avoids a significant downturn and US dollar weakness ends. Conversely, in a downside scenario, the index could fall to 10,200 if economic and political risks intensify, particularly for Switzerland with its above-average international exposure.