T&V Letter | Q2 2025

Insight

Why is the Swiss franc so strong?

Since the end of the gold standard in the 1970s, the US dollar has lost around 79% of its value against the Swiss franc – and the British pound has lost as much as 81%. The euro has also lost around 41% of its value since its introduction in 1999.

While many currencies have lost massive purchasing power and trust, the Swiss franc has developed into a global store of value – stable, sought-after and reliable. However, this strength is not the result of political planning, but rather the outcome of decades of reliable, consistent framework conditions. It is not words, but steady and decisive action, that has built lasting trust.

Switzerland has deliberately positioned itself differently from the rest of the world in many fundamental areas – and this is precisely reflected in the exchange rate of its currency.

But what makes the Swiss franc so robust?

Solid public finances – Long-term confidence 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 genuine value preservation.
Stable labour market – Strengthens consumption, domestic demand and trust in society and politics.
Special international position – Independent, neutral, open – but not reliant on others.

The Swiss franc is not strong because it is defended – but because it is credible.

Dear reader

Following the protectionist shockwave from the US at the beginning of the year, the situation on the financial markets stabilised surprisingly well in the second quarter. Many indices – led by the US stock markets – were able to recoup 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 at first glance looks like a return to normality is, on closer inspection, much more sobering 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 concrete terms? Even those who invested in well-performing US stocks saw their returns in Swiss francs shrink significantly. Currency is no longer a side issue – it is becoming a key factor in 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

However, withdrawing from the US market is hardly an option – American companies are too dominant in terms of technological leadership. According to renowned investor Philippe Laffont, we are only at the beginning of a super cycle in artificial intelligence. Such technological upheavals often only occur once a decade on a global scale – currently clearly driven by the US.

The facts speak for themselves: the US accounts for around 75% of global tech market capitalisation and 60% of AI researchers worldwide. Added to this is a high concentration of engineering talent and an ecosystem of leading universities.

In short, anyone who wants to participate in the digital future cannot ignore the USA – 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 should we deal with the currency issue?

These are questions many investors are currently asking themselves. The temptation to react to short-term signals is great. But this is precisely where investment success is separated from knee-jerk reactions. Discipline, a clear compass and adherence to proven principles remain crucial – especially in an environment where geopolitical and economic conditions can change rapidly.

Our guiding principle is that value is not created by rushing, but by maintaining a clear strategy that remains valid even in turbulent times.

Where to put your capital?

Given the weakness of the dollar, it makes sense to invest more heavily in the Swiss market. The idea 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 such as Nestlé and Roche are weighing on overall performance.

Although the strong franc protects against imported inflation, it also acts as a natural brake on export-oriented companies.

What does this mean? The domestic market remains an important component of a portfolio – but it is not a complete answer to the problem of returns 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' and his tariff policy – are likely to cause further market movements. 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 remain convinced that a disciplined, broadly diversified portfolio with high-quality investments is – and will remain – the most reliable way to protect and grow wealth over the long term.

As always, we thank you for the trust you have placed in us!

*This communication is for information purposes only and constitutes neither a personal recommendation nor an independent financial analysis.

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