The Swiss Market Index has risen 4.6% this month as the Euro Stoxx 50 fell 3.2%, marking the widest outperformance since March 2020. Investors are rotating toward defensive assets amid rising borrowing costs, skepticism around AI investments, and political instability in France and Spain.
Drugmakers Roche Holding AG and Novartis AG are up 12% and 6.7% respectively in October, while Nestlé SA has rallied 10%. These three companies account for nearly half the index's value and drive almost all of the month's gains. Only four cyclical stocks in the SMI are down this month.
The shift toward defensives reflects investor preference for high-profitability firms with strong balance sheets that are less exposed to rising borrowing costs. A net 16% of fund managers surveyed by Bank of America Corp. now prefer Swiss equities as their top European market. Smaller constituents like Givaudan SA and Galderma Group AG have also gained.
However, the rally has pushed the SMI back into expensive territory relative to the past decade and against the Euro Stoxx 50, where it is at its highest premium in almost two years. The weakening Swiss franc has bolstered export-dependent large-cap earnings, with Bloomberg Intelligence forecasting 10% earnings growth for 2027.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing