Strength with Side Effects
T&V Letter Q2 2025
For decades, the Swiss franc has stood for stability, trust, and the preservation of purchasing power. However, for investors, its strength is not only an advantage but also a challenge. Anyone investing globally must carefully combine yield opportunities, currency risks, and long-term strategy.
Insight
The franc is not strong because it is being defended, but because it has built up trust over decades.
Why is the franc so strong?
Since the end of the gold standard in the 1970s, the US dollar has lost around 79% against the franc – and the British pound has even lost 81%. The euro has also lost about 41% of its value since its introduction in 1999.
While many currencies have lost massive purchasing power and trust, the franc has developed into a global store of value – stable, in demand, and reliable. However, this strength is not a product of political planning, but the result of decades of reliable framework conditions. Not words, but consistent action has built trust.
Switzerland has deliberately positioned itself differently from the rest of the world in many fundamental areas – and that is precisely what is reflected in the exchange rate of its currency.
But what makes the franc so robust?
Solid public finances – Long-term trust in a currency begins with fiscal discipline.
Credible monetary policy – The SNB is committed to price stability, independent and free from political influence.
Long-term price stability – The most important factor for real preservation of value.
Stable labor market – Strengthens consumption, domestic demand, and trust in society and politics.
Special international status – Independent, neutral, open – but not dependent.
NEWSLETTER
Dear Reader
Following the US's protectionist bombshell at the beginning of the year, the situation on the financial markets stabilized surprisingly in the second quarter. Many indices – first and foremost the US stock markets – were able to make up for their losses. The S&P 500 even reached a new all-time high in June.
Records in the US – but not for Swiss investors
What looks like a return to normalcy at first glance appears much more sobering when examined more closely from a Swiss perspective.
Since the beginning of the year:
S&P 500 in USD: +6%
S&P 500 in CHF: –7%
USD/CHF: –13%
What does this mean in practice? Even those who invested in well-performing US stocks saw their returns shrink significantly in Swiss francs. The currency is no longer a side issue – it is becoming the key variable for real portfolio performance.
As a former US Treasury Secretary once dryly put it: “The dollar is our currency, but your problem.”
Nevertheless, there is no way around America
An exit from the US market is nevertheless hardly an option – the technological leadership of American companies is too dominant. According to renowned investor Philippe Laffont, we are only at the beginning of a supercycle in the field of artificial intelligence. Such technological upheavals often happen only once a decade – and are currently clearly driven by the US.
The facts speak for themselves: Around 75% of global tech market capitalization and 60% of the world's AI researchers are in the US. Add to this a high density of engineering talent and an ecosystem of leading universities.
In short: Anyone who wants to participate in the digital future cannot avoid the US – even if the exchange rate hurts in the short term.
Think strategically instead of acting short-term
So how do we deal with the uncertainty? How do we handle the currency issue?
These questions are currently being asked by many investors. The temptation to react to short-term signals is great. But this is exactly where investment success separates itself from activism. Discipline, a clear compass, and sticking to proven principles remain crucial – especially in an environment where geopolitical and economic framework conditions can change rapidly.
Our principle is: Value is not created through hectic activity, but through attitude – a clear strategy that endures even in stormy times.
Where to put the capital?
In view of the weak dollar, it seems obvious to invest more heavily in the Swiss market. The thought is understandable – but only viable to a limited extent.
Yes, a CHF-based portfolio reduces exchange rate risks. However, the Swiss economy is growing modestly, interest rates are back at zero, and the stock market has been moving sideways for months. In addition, structural weaknesses in index heavyweights like Nestlé or Roche are weighing on overall performance.
Although the strength of the Swiss franc protects against imported inflation, at the same time it acts as a natural brake on export-oriented companies.
What follows from this? The home market remains an important building block in a portfolio – but not a complete answer to the return problem in a challenging global environment.
Political risks remain present
In the second half of the year, political developments – particularly Trump's so-called 'big, beautiful bill' as well as his tariff policy – are likely to cause further movements in the markets. The growing influence of economic nationalism and strategic decoupling will continue to fuel geopolitical tensions and make the investment environment more volatile.
Our conclusion:
Even though it is currently challenging to achieve attractive returns in Swiss francs, we stand by our conviction: In our view, a disciplined, broadly diversified portfolio with quality investments is – and remains – the most reliable way to protect and grow wealth over the long term.
As always, thank you for the trust you have placed in us!
*This communication is for informational purposes only and does not constitute a personal recommendation or an independent financial analysis.
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