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
After the US 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 reveals itself to be much more sober from a Swiss perspective upon closer examination.
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 concrete terms? Even those who were invested in well-performing US stocks saw their returns shrink significantly in Swiss francs. Currency is no longer just a side issue – it is becoming a key factor for real portfolio performance.
As a former US Treasury Secretary once dryly put it: “The dollar is our currency, but your problem.”
Yet, there is no way around America
Nonetheless, withdrawing from the US market is hardly an option – the technological leadership of American companies is too dominant. According to the renowned investor Philippe Laffont we are only at the beginning of a super-cycle in the field of artificial intelligence. Such technological shifts often occur only once a decade – and are currently clearly driven by the US.
The facts speak for themselves: Around 75 % of the global tech market capitalization and 60 % of AI researchers active worldwide are based in the US. In addition, there is a high density of engineering talent and an ecosystem of leading universities.
In short: Anyone who wants to participate in the digital future cannot bypass the US – even if the exchange rate hurts in the short term.
Think strategically, instead of acting short-term
So how should we deal with the uncertainty? How with the currency issue?
These are questions that many investors are currently asking themselves. The temptation to react to short-term signals is great. But this is precisely where investment success separates itself from mere activism. Discipline, a clear compass, and adhering to proven principles remain crucial – especially in an environment where geopolitical and economic conditions can change rapidly.
Our principle is: value is not created through hectic activity, but through attitude – a clear strategy that stands firm even in turbulent times.
Where to put the capital?
In view of the dollar's weakness, it seems logical 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. But: the Swiss economy is growing modestly, interest rates are back to 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.
While the strength of the franc protects against imported inflation, at the same time, it acts as a natural brake for 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 – in particular Trump's so-called 'big, beautiful bill' as well as his tariff policy – are likely to cause further movements in the markets. The increasing influence of economic nationalism and strategic decoupling will continue to fuel geopolitical tensions and make the investment environment more volatile in the future.
Our conclusion:
Even if it is currently challenging to achieve attractive returns in Swiss francs, we stand by our conviction: a disciplined, broadly diversified portfolio of quality investments is – and remains – in our view the most reliable way to protect and grow wealth over the long term.
As always, we thank you for the trust 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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