Monthly Report 04/2026

The National Bank will continue to monitor the situation closely and adjust monetary policy if necessary to ensure price stability in the medium term. As expected, inflation has risen slightly since the SNB’s last assessment of the economic situation, from 0.0% in November 2025 to 0.3% in March 2026 (Y-o-Y). Higher commodity prices have contributed in particular to this increase.

With energy prices rising due to the escalation in the Middle East, inflation is likely to increase more sharply in the coming quarters, though the stronger Swiss franc will counteract this in the medium term. On a trade-weighted basis, the Swiss franc has appreciated by around 2.5% since mid-December. Consequently, the SNB forecasts annual average inflation rates of 0.5% (2026 and 2027) and 0.6% (2028).

This is a far cry from the inflation spike of 2022 and 2023, which was temporarily associated with inflation rates exceeding 3%. The annual average inflation rate in 2022 was 2.8%.

Because interest rates in Switzerland are significantly lower than abroad, this makes investments in Swiss francs less attractive to foreign investors and thus counteracts upward pressure on the currency. The stimulative effect of low interest rates is also evident in the robust growth of credit in Switzerland. In this way, the SNB’s monetary policy supports economic development.

Conversely, franc investors who invest their capital abroad face the question of whether at least part of this exposure should be hedged. Hedging costs against the dollar stood at around 3.9% annually at the end of March, and around 2.3% against the euro.

Ultimately, the franc’s appreciation is largely driven by the inflation differential. It makes imports cheaper. If these imports are processed into higher-value goods through corresponding productivity improvements, the Swiss economy can tolerate the resulting increase in export prices. A moderate appreciation of around 2% to 3% per year is like a constant fitness regimen for local companies. They must constantly and continuously improve in order not to lose international competitiveness.

Moreover, the SNB rightly emphasizes that stable and favorable economic conditions – including price stability – are more important today than ever. Price stability is a key prerequisite for growth and prosperity in Switzerland. Stable prices provide planning certainty and thus facilitate purchasing and investment decisions. Stable prices benefit everyone, but they particularly protect lower-income households, which are most vulnerable to losses in purchasing power caused by inflation – that is, by (sharp) rises in consumer prices.

Certainly, macroeconomic forecasts would first need to be revised to account for the possibility of interest rate hikes should oil prices, for example, reach $200 – instead of the current level of around $100. This could lead to stark inflation forecasts, but such inflation concerns seem unfounded to us. Certainly, we will keep an eye on the entrenchment of inflation due to second-round effects, especially since these influence medium-term inflation expectations.

However, raising interest rates at this point would not curb supply-driven inflation but would instead harm the economy as a whole. Raising key interest rates during war-induced stagflation would only exacerbate this crisis. Incidentally, an economic downturn tends to be accompanied by falling price levels, not rising ones, which would amplify the effect.

Given this aspect of demand destruction, we do not expect interest rate hikes, even if the market is currently pricing them in. In the eurozone, the market anticipates a rise in key interest rates from an effective 1.9% to 2.6% in the fall of 2026. In the base scenario, that would entail two to three rate hikes.

The European Central Bank (ECB) is in a good position to wait and see how data develops. We also consider interest rate hikes by the US Federal Reserve (Fed) to be unlikely at present, as are rate cuts, which US President Donald Trump would like to see.

The yield curve in the Swiss franc capital market has shifted upward. For 10-year bonds, yields are 13 basis points higher (from 0.42% to around 0.55%). However, these are the smallest yield increases globally over the past month.

For 10-year government bonds, for example, the increase in the UK was 44 basis points to 4.9% and in Italy 36 basis points to 3.9%. In Germany, too, the recent yield level on 10-year Bundesbonds – just over 3.0% – has not been seen in 15 years. This means that an extremely large number of negative consequences are already priced into benchmark bond yields. Possibly too many.

And yet, the capital market is sending warning signals. On March 11, the German government was left holding the bag on offered government bonds during a routine auction. The market signal was clear: We won’t buy all of your debt. The U.S. Treasury Department learned the same lesson: Interest rates had to be raised significantly at both the short end (+31 basis points to 3.8%) and the long end (+14 basis points to 4.3%) in order to sell the Treasury bonds.

Thus, the bond solutions have fulfilled their primary role in a diversified portfolio. They are intended to serve as a safety buffer and fluctuate significantly less than equities. But one can never completely avoid global events. When uncertainty arises, risk premiums widen across the board, driven by concerns about economic, sector-specific, and company-specific developments.

It is not surprising that credit risk premiums in the segment with higher credit quality (e.g., ZIF) widened less sharply than those in the segment with lower credit quality (COF). However, the significantly shorter average remaining maturity ensured that the decline was limited.

Another factor is currency trends. The Swiss franc appreciated not only in nominal terms but also in real terms during the first quarter of 2026. This has led to low inflation expectations. However, since yields – particularly on longer-term corporate bonds – have risen, we have increased our exposure in this area: For example, with a 6-year Swiss franc bond from insurance broker Chubb at 1.0% and an 8-year bond from Georg Fischer with a coupon of 1.65%. We also acquired a similarly profitable bond from energy provider E.ON with a 12-year maturity. This will generate solid interest income in the coming years.

In the ZIF, prices fell immediately after Easter when the withholding tax credits from interest income were transferred to the Federal Tax Administration. In our tied pension solutions (3a, vested benefits), such credits are routinely reclaimed and returned to client portfolios. For non-tied assets, the refund is processed as part of the tax return declaration.

For us, the main scenario is a de-escalation in the Middle East during the second quarter. According to betting odds, there is a 70% probability that the Strait of Hormuz will be navigable again by the end of June. This would lead to falling prices in the energy markets and cause globally available household income to rise again. In particular, inflation expectations could decline, which would cause bond prices to rise again.

However, oil and gas infrastructure cannot be switched on and off overnight. The resumption of full operations (production, refining, transportation) is likely to take longer than some believe, as a significant portion of the infrastructure is still damaged and must first be repaired.

In the coming quarters, interest rates for money market mortgages are likely to remain largely stable. However, slightly higher inflation expectations and banking regulatory requirements are expected to continue pushing interest rates for multi-year fixed-rate mortgages to a slightly higher level. As we explained in the “Bonds” section, interest rates rose in Switzerland, though much more moderately than abroad. Therefore, from a historical perspective, current and likely future financing conditions can still be described as favorable.

Risk-averse individuals tend to rely on long-term fixed-rate mortgages when financing their home ownership. While this is certainly not a bad approach in optimal mortgage financing, it remains advisable to stagger the fixed-rate periods to avoid exposure to the risk of an interest rate shock. For example, anyone who had to renew their entire mortgage debt at once in early March 2023 suddenly found themselves in an uncomfortable situation.

Ten-year Swiss government bonds yielded 0.3% at the end of March. This is the average since the beginning of the year – with relatively small fluctuations (0.2% to 0.4%). In the first quarter of 2026, various Swiss real estate companies were also able to refinance favorably on the Swiss franc capital market. They issue a variety of bonds to spread out the fixed-rate periods and reduce their exposure to fluctuation risks.

In January, Mobimo issued an approximately eight-year “green” bond with a coupon of 1.35%. PSP Swiss Property issued a bond of similar duration at 1.4% in late February. Swiss Prime Site opted for a shorter term (6 years), with a significantly lower coupon of 0.95%. It also issued a zero-coupon convertible bond.

All of these are large Swiss real estate companies with a broadly diversified portfolio and a structurally low debt ratio. As a private real estate investor with a single property, it is clear that the risk premium is likely to be higher.

In the longer term, demand for housing is expected to continue rising significantly in economically strong regions through 2040. While official spatial planning policy aims for densification, the restrictions of current spatial planning practices create a paradoxical tension: While spatial planning seeks to curb urban sprawl, a lack of space, rising land prices, and lengthy approval processes in dynamic urban centers are causing growth to shift to more distant municipalities. This typically results in longer commuting distances and increased traffic volume – precisely the issues that inner-city densification was intended to prevent.

In March, sentiment among both retail and institutional investors shifted significantly from optimism to pessimism. We view this, along with the rise in volatility, as an opportune moment to increase equity exposure.

A year ago, the SMI experienced a 16% decline in a very short period of time. The recovery began quickly and recouped the paper losses. A similar pattern can be observed in March 2026. After hitting a low of around 12,060 points at noon on March 23, the recovery began. By the end of the month, the SMI had already rebounded to 12,777 points: +5.9% from the low and only 3.7% lower than at the start of the year.

A renewed short-term decline in the event of an escalation certainly cannot be ruled out. However, in our base scenario, we anticipate a medium-term recovery accompanied by “normalized” energy prices. We would like to remind you that the best moments in the stock markets are very close to the worst. Anyone who exits the market and then changes their mind – sometimes just half an hour later – risks losing an entire year’s return by doing so.

We made changes to our equity allocation in March. In risk class 1 (max. 20% equity allocation), we moved closer to this limit, particularly with Swiss equities, because valuations and timing appear favorable to us from a longer-term perspective.

In risk class 5 (e.g., Revo5), we still held 10% of the total allocation in high-yield bonds. We have completely sold this position and invested the corresponding capital in a broad diversification of international stocks. This has significantly improved the medium- and long-term recovery potential. We have also reduced the size of various company-specific positions in order to benefit even more strongly from the overall market recovery through certain ETF components.

With Swiss equities, we are focusing even more strongly than before on a stock’s dividend strength. The 2026 dividend season is indeed proving to be bountiful. Despite the crisis in the Middle East, more than 80% of the companies in our portfolios have proposed a dividend increase. For heavyweights such as Novartis and Roche, the dividend payout has already taken place.

Just as quickly as the sales are made, positions can be covered again, which can then be observed in retrospect as a “V-shaped recovery” in the index trend. Developments in the technology sector involving AI agents triggered the first wave of uncertainty, while those in the energy markets triggered a second. Algorithmic selling waves reached massive proportions over the last 30 trading days (-$85 billion). This was the largest wave since the sell-off six years ago during the pandemic (-$105 billion). Short positions reached a 15-year high in some indices (e.g., Russell 3000), or at least the level seen in April 2025 (“Liberation Day”).

AI fears cannot be dispelled in the short term. But the scale of the impact on the global oil supply may be exaggerated. Certainly, transit through the Strait of Hormuz plays a special role. 19.3% (2025) passed through the strait, while 80.7% took a different route. Typically, there were around 80 to 100 daily passages by energy tankers. Currently, due to the escalation of the Iran conflict, there are only sporadic ones. This de facto blockade has led to higher energy prices worldwide since mid-February.

In March, the price of Brent crude oil rose from $73 to $118 (+62%). However, Saudi Arabia is now already using a different pipeline to ship its oil. 80% of the Iranian oil shipped went via Malaysia to China, whose energy system relies heavily on coal but much less on oil and gas than, for example, Germany. The Middle East accounts for only 4% of Europe’s gas supply directly, but the ripple effects are global in nature.

Over the coming weeks, we expect financial markets to gradually cushion the downward pressure associated with the crisis in the Middle East. The prospect of talks between the United States and Iran is helping to limit downside potential and unlock upside potential. We are likely to remain in a period of heightened tensions for some time, as external diplomatic efforts cannot really be taken seriously.

The markets’ attention therefore remains focused on the development and duration of the tensions, while the broader global macroeconomic context takes a back seat. A potential rise in energy prices, provided it is only “temporary,” is unlikely to significantly impair growth prospects, as we explained at the beginning of this monthly report.