Swiss Equities Offer Value, UBS Sets 14,000 SMI Target

Key Highlights

UBS Switzerland AG has identified Swiss equities as an attractive investment, highlighting their defensive qualities amidst geopolitical uncertainty. The firm has set a central scenario target of 14,000 for the Swiss Market Index SMI by December 2026.

Market Overview

The Swiss Market Index currently shows a forward price-to-earnings ratio of approximately 16 times, slightly above its long-term average of 15.8. Despite this, UBS considers valuations appealing due to record-high corporate profitability. The market also offers a sustainable dividend yield exceeding 3 percent, a significant draw in a zero-interest-rate environment.

Economic and Profit Outlook

Last year, SMI companies experienced flat earnings growth as operational gains were offset by currency losses. UBS anticipates these negative currency effects will lessen from the second quarter of 2026. The global economic outlook is projected to improve later this year, supported by lower interest rates and fiscal policy measures.

UBS's SMI Scenarios

UBS projects three potential outcomes for the SMI by December 2026. The central target is 14,000. An upside scenario places the target at 15,000, while a downside scenario, considering risks like a global slowdown, sets the target at 10,500.

Conclusion and Investment Strategy

In conclusion, UBS recommends focusing on quality companies and profitability leaders within the Swiss market. Attractively valued yield stocks with dividend growth are a preferred investment theme. Investors should also monitor structural opportunities in sectors like longevity and energy transition.

FAQ

Q: Why does UBS find Swiss equities attractive?
A: UBS sees them as attractive due to high-quality companies, defensive sector exposure, appealing valuations, and a dividend yield over 3 percent.

Q: What is UBS's target for the Swiss Market Index (SMI)?
A: The central scenario target is 14,000 by December 2026, with an upside of 15,000 and a downside of 10,500.

Q: What are the main risks for the Swiss equity market?
A: Key risks include a significant global economic slowdown, further appreciation of the Swiss franc, and international political disputes.

Source: Investing.com