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29. January 2025 | Dr. Thomas Hauser

Will US equities continue to leave the Swiss market behind?

Over the past year, the Swiss SPI index has risen by around 6%, while the US stock market, measured in Swiss francs, has delivered more than five times that return. It is fair to say that the US market has recently outperformed the Swiss index, especially as the difference in returns over the last two years is around 40%.

This IT-driven surge in the US market has also led to a valuation that is one third higher than that of the Swiss market in terms of the price-earnings ratio (P/E).

However, history shows that there have been several periods of significant divergences in returns between the two markets. The chart shows the difference in returns between Switzerland and the US over the past 50 years. It reveals that a large divergence is not unusual, and indeed such divergences have occurred on both sides.

Therefore, despite periods of large differences in returns, the two markets have not systematically drifted apart over the long term. Over the past half century, the annualised return on Swiss equities has been 9.4%, while US equities have returned 9.6% per year – almost identical average returns. Will this change in the future due to US dominance? No one knows for sure. But scepticism is warranted.

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