Monthly Report 01/2026

In 1910, one dollar could still buy 30 Hershey chocolate bars (his Swiss ancestors were called Hirschi, but the name was changed in the US). Today, a milk chocolate bar at Walmart costs $1.82 – 55 times more. Conversely, it can be calculated that more than 98% of purchasing power has been destroyed in just over a century. Today, $1.00 corresponds to less than $0.02 in purchasing power.

Since the introduction of flexible exchange rates in 1971, the dollar has also suffered severe losses in its external value: -81.4%. Initially, one had to pay 4.30 francs for one dollar, today it is only 79 centimes. There is another component to this loss of purchasing power. We must continue to expect an annual loss in value of 3%. However, the trend is unlikely to be linear. This could lead to the idea of hedging the currency. This currently costs 3.8% per annum. In 2024, it would not have been worthwhile, but in 2025 it would have been. Whether it will be worthwhile in 2026 is difficult to predict.

The lower currency hedging costs against the euro (approx. 2.1%) reflect more sustainable fiscal and monetary policy as well as lower inflation and interest rate differentials. In the case of the dollar, the political crisis of confidence in 2026 could prevent it from bottoming out. In the past, the dollar has always weakened when the Fed has cut interest rates and the US has not been in recession. In addition, markets could further strengthen their expectations of multiple interest rate cuts by the Fed in 2026 with the appointment of a new Fed chair who is loyal to Trump. This is compounded by questions about the Fed chair’s ties to the White House. This could lead to further currency depreciation.

In this context, it is important to consider whether you are looking at things from a dollar or a franc perspective. Last year, the US stock markets rose impressively, but the returns converted into francs looked modest. The Dow Jones (with stocks such as Nvidia, Apple, Amazon, Microsoft, Salesforce, and Cisco) rose +13.0% in dollars. In Swiss francs, this resulted in a return of -1.3% (!). The Nasdaq technology index (+20.2% in USD) performed less well in Swiss francs (+5.0%) than the Swiss SMI (+14.1%). And the broad S&P 500 index from the US (+16.1% in USD) translates into a meager +1.0% (in CHF).

The Chinese currency also performed poorly, meaning that the Hong Kong-traded Hang Seng Index (+13.8% in CHF) and the Shanghai/Shenzhen Index CSI 300 (+12.2%) did not generate exceptional returns either – and this in a year that dealt US tech giants a significant blow with DeepSeek. They had to learn quickly that technological competition is not limited to the players in Silicon Valley.

At the beginning of the year, investors look at the year as a whole and its prospects. In the bond market, they look at the entire yield curve and how it is changing. Is it becoming steeper or flatter, and by how much? Currently, there is less concern about repayments than about the volume of new bond issues. If government budget deficits rise, as is the case from the US to Europe to India and China, a record volume of government bonds is to be expected. The US Treasury bond market alone has doubled since 2018 to over $30 trillion.

Within Europe, some countries are pursuing a sound budgetary strategy. As a result, fewer issues are expected from heavyweights Italy and Spain, and the volume of issues is also likely to decline in smaller countries such as Portugal, Greece, and Ireland. In contrast, Germany’s volume is increasing as a result of its expansionary fiscal policy in favor of renewing its vulnerable infrastructure and improving its defense capabilities. If the government could decide on urgent reforms as quickly as it takes on new debt, not only Germany but the whole of Europe would be much further ahead.

It is impossible to predict how the market will react to the flood of emissions in the new year. It is entirely conceivable that Germany’s ambitious economic stimulus program will get off to a surprisingly good start, in which case the supply of bonds will be eagerly snapped up. Conversely, it cannot be overlooked that the long-term trend in government debt in both industrialized and emerging countries is not very encouraging and carries the risk of rising credit risk premiums. The same applies to Germany: a government without the power to reform is considered a risk.

Ten-year US government bonds are currently yielding 4.1% in dollars. However, currency hedging against the Swiss franc costs 3.8% per annum, meaning that the net yield prospect is practically zero. Those hoping for lower long-term interest rates in the US could, however, benefit from price gains in the coming quarters. Investment opportunities could increase significantly with long-term bonds if inflation and interest rate expectations move in the “right” direction.

From a fundamental perspective, corporate bonds offer greater potential for value. In addition to government bond yields, they carry a company-specific risk premium. Popular US technology companies have solid balance sheets and, in many cases, very high credit ratings. This often results in premiums of only 40 to 90 basis points (bp) over government bonds. The longer the term, the higher the premium. This means that a 25-year bond from Microsoft, Alphabet, or Apple yields around 5.2%, while one from IBM yields 5.7%. If confidence is lost, the premium quickly jumps. Despite its good rating, Oracle has to accept a risk premium of 160 BP.

The Swiss Bond Index (AAA to BBB Total Return Index), which represents bonds on the Swiss franc capital market, ended 2025 slightly down (-0.1%). In general, however, investors are more inclined to consider increasing their exposure to corporate bonds than to government bonds, which offer hardly any return.

With our active bond solutions based on corporate bonds, we significantly outperformed the passive index solution. Even more impressive is that this was achieved with lower volatility, meaning that our solutions delivered impressive risk-adjusted returns in the bond segment.

The interest rate structure on the capital market changed significantly last year. The steepening is evident on both sides. At the short end, interest rates are around 48 basis points lower than a year ago following two interest rate cuts by the Swiss National Bank. Market forces are at work at the long end. Yields are already higher than a year ago for bonds with a maturity of two years or more. For 30-year bonds, the yield is 50 basis points higher per annum. It was precisely this interest rate sensitivity that led to sharp price declines on longer-term bonds.

With the slightly more risk-tolerant Credit Opportunities Fund (COF), investors are investing in companies whose ratings are not top notch. However, the average time to maturity is around three years. Interest rate changes play a minor role. And with over 200 bonds, the fund is highly diversified. If a single company gets into trouble, it does not immediately drag the entire fund down with it.

After 13 years, the COF in particular has achieved impressive returns, adjusted for price fluctuations (volatility), compared to the Swiss Bond Index: the risk/return ratio is significantly better. The bonds recover much more quickly after price slumps.  This has also been evident over the past five years. The key interest rate hikes of 2022 caused the sharpest slump in bond prices in 50 years. The Swiss Bond Index has still not fully recovered from this. The COF, on the other hand, is around 8% above the level of five years ago. A certain degree of risk tolerance is worthwhile, especially if you are then able to weather the price slumps.

For diversification purposes, we also use the Infrastructure Debt Fund from AWI Investment Foundation. With a return of +1.6%, the fund clearly outperformed the Swiss Bond Index last year with moderate volatility.

From an investor perspective, we continue to view infrastructure stocks such as Engie (+43% price change in CHF over the past year), Veolia (+11%), and E.ON (+39%) as attractive. We will also hold on to BKW (+6%) and strengthen our infrastructure portfolio with Enel, as the growth outlook remains excellent. Demand for data centers remains unbroken. These place special demands on power generation and distribution. The focus is on high energy efficiency, stability, and security of supply at market-driven prices.

State-of-the-art data centers form the backbone of our economy – for financial services, technology, and research, as well as for electromobility and self-driving cars, among other things. At the same time, Europe is benefiting from deregulated electricity markets. Markets do not tend to become unbalanced or unwittingly fall into structural shortages. Rather, investment costs are weighed up and minimum requirements for return on investment are set. Only when planning security is increased through long-term contracts with built-in inflation protection clauses is infrastructure investment even considered.

Currently, demand for energy supply from data centers is rising, and industrial consumption is increasing so rapidly that electrification plans and power supply solutions must be made available quickly if we do not want to fall behind in terms of competitiveness. Data centers are just one element in a dramatically changing environment in Europe, and their impact should be assessed in a circular, comprehensive manner, as is increasingly the case with all other factors involved in this development.

Modernizing vulnerable infrastructure remains the order of the day. This applies to power and rail networks, ports, highways, but increasingly also to communication networks extending into space (satellites).

We remain convinced and invested in Zurich Airport (+16%). The management’s forecast of around 32 million passengers for the year as a whole is likely to be clearly exceeded. It remains interesting that the company is increasingly focusing on revenue outside its regulated business, for example, the retail space before and after security checks, real estate such as The Circle and the Radisson Blu Hotel, and foreign investments (e.g., Noida in India). A significant dividend increase is on the horizon, which should lead to a dividend yield of 3.0% – with an upward trend in distributions in the coming years.

The search for capital and talent continues, while smaller companies compete with America’s powerful tech monopolies, which are printing money faster than the Fed during the pandemic. Meta (Facebook) is also getting involved. Zuckerberg reportedly plans to cut his spending on the metaverse by 30% and buy cheaper AI chips from Google instead of Nvidia in order to further focus resources on winning the AI race.
The typical Silicon Valley behavior prevails: coopetition – cooperation with the same company in some areas, competition and rivalry in others. No one can even begin to say what it means to win this race. But anyone who has already bet everything on AI knows that defeat is not an option. So the competition is becoming increasingly intense. It is worth considering that nothing like this has ever happened before in history. The world’s most powerful companies may have their headquarters in California, but they are no longer simply exploiting their monopolies. They are leveraging the world’s best intellectual tech talent and an unprecedented amount of capital expenditure in a race into the unknown, with no guard rails, no airbags, and no guarantees.
Competition is also looming from China, where, following early AI developers DeepSeek and Moonshot AI, more than 500 language models are now vying for customers. Beijing has signaled to domestic tech companies such as Tencent, Alibaba, and Bytedance (Tiktok) to replace Nvidia chips with domestic solutions from chip manufacturers such as Huawei, Xiaomi, Moore Threads, and Cambricon. The government itself is pumping around $50 billion into the industry over the next five years to break away from the US. This is fueling speculation in China, which is why Chinese stocks are also skyrocketing: Moore Threads, for example, is valued at just under $40 billion on the stock market, but only achieved sales of just over $100 million last year – and incurred losses of almost the same amount. Whether the company will ever turn a profit is questionable.
Unless you are a top technology expert, you are currently bombarded with numerous news items that are difficult to classify. About two weeks ago, for example, Nvidia reported benchmark data that was ten times faster than the models from the Chinese laboratories DeepSeek and Moonshot AI. Nvidia has an extreme co-design between chips, networks, and software. The crucial question is whether these figures offer users freedom or merely represent a more lucrative form of lock-in. At the same time, we must abandon the idea of incremental progress. What we are currently experiencing is a technological acceleration unlike anything humanity has ever seen before. This will result in productivity potential in the coming decade that we cannot even begin to imagine.

Traditional portfolio theory focused solely on combining stocks and bonds. Real estate was already considered an alternative. The past decades have also proven its value in diversifying real assets. Over the past two decades, infrastructure has emerged as an asset class with valuable characteristics that also contribute to diversification.

Commodities as an alternative investment cover a range of sub-themes: oil and gas, industrial and precious metals, foodstuffs, and cryptocurrencies. We recognized such an opportunity in Bitcoin, but in 2025 it took a disappointing turn (-18% in CHF). Since 2008, Bitcoin’s price trend has followed a pattern: two years up, two years down. Technically, there are currently no signs of a reversal of this pattern for the so-called “digital gold.” Since its peak on October 6, the decline has been particularly sharp (-30%). Precious metals, on the other hand, have seen a new revival (gold +50% in CHF), and gold purchases by central banks in emerging markets such as Poland, Kazakhstan, Brazil, and China continue.

Crude oil prices have fallen by 22% in dollars (-31% in Swiss francs). The US intervention in Venezuela has done nothing to change this. On the contrary, Donald Trump wants the energy rights back. At the heart of the dispute was Venezuela’s Orinoco oil belt, one of the world’s two richest areas for heavy and extra-heavy oil. It is also a region where US oil giants such as ExxonMobil, Chevron, and ConocoPhillips have long been active. Their refineries in Texas are geared towards heavy oil and are now set to return to full capacity. In 2007, Hugo Chavez ordered the transfer of a majority stake in all projects in the Orinoco to the Venezuelan state-owned company PDVSA. In addition, Venezuela is rich in a range of minerals, including rare earths, which are crucial for modern technologies. The US wants to secure strategic access to these.

However, we are not seeking diversification primarily in commodities, but in private market investments. 2026 is likely to be a good year for long-term private market investments, thereby achieving the hoped-for diversification effect in the overall portfolio. Lower interest rates are accompanied by better valuations. Transaction volume developed positively in the fourth quarter of 2025 and started the new year on a confident note. This is likely to lead to significant additional income for private market managers such as KKR, Blackrock, Apollo, EQT, Partners Group, and HBM Healthcare Investments.

Private market investments are also particularly interesting because they play a growing role in the financing of equity (private equity) and debt (private credit) in the areas of infrastructure, energy, data centers, and AI. Many companies appreciate being able to drive their growth away from stock market-related quarterly reporting on customers, margins, profits, etc.

While it went public in 2004, just eight years after its founding, the length of time spent outside the stock market has doubled over the past 20 years. In addition, technology leaders such as AI pioneer OpenAI and space-related SpaceX can also conduct attractive financing rounds, even though their valuations have long since significantly exceeded those of Roche or Nestlé.