In this section, authors comment on economic and financial topics.

Swiss investors have traditionally placed great trust in the domestic market. That is understandable: Switzerland stands for stability, legal certainty, a strong currency and companies of global stature. But that very familiarity can become a trap. Many portfolios are significantly more exposed to Switzerland than it first appears.

A foretaste of this emerged in August 2025. The US imposed tariffs of 39 percent on Swiss exports. As a result, the SMI lost almost 2 percent in a single trading day. After months of negotiations and Switzerland’s pledge to invest at least $200 billion in the US, the tariff rate was reduced to 15 percent.

«Swiss investors benefit from one of the most stable financial centres in the world. But stability is no substitute for diversification.»

The episode was quickly digested. The underlying question, however, remains: How resilient are Swiss portfolios really when external shocks hit the domestic market?

Familiarity is not diversification

Swiss investors benefit from one of the most stable financial centres in the world. But stability is no substitute for diversification.

Pension funds in Switzerland hold on average between 33 and 40 percent of their equity investments in Swiss securities. If this weighting were aligned with Switzerland’s share of global equity markets, it would be closer to around 2 percent. Added to this are earned income in Switzerland, property ownership, bonds and other assets, which are often also heavily dependent on the domestic environment.

This creates a concentration risk that is barely noticeable in everyday life. In periods of stress, however, it can become decisive.

The Swiss equity market itself is also less broadly based than many investors assume. At the end of 2024, almost half of the Swiss Market Index consisted of just three companies: Nestlé, Novartis and Roche. In the MSCI Switzerland, these three names still accounted for around 38 percent of market capitalisation.

A Swiss equity index may appear diversified on paper. In practice, however, its performance depends heavily on a few heavyweights.

The problem is not only Swiss

This trend is not unique. Market concentration has also risen sharply in the US. The ten largest companies now account for around 41 percent of the S&P 500 — a level not seen since the dot-com bubble.

For investors, that means: simply shifting from the Swiss market into US equities does not automatically mean diversification. In some cases, it merely replaces three Swiss heavyweights with a handful of American technology groups.

«Foreign revenues are not the same as international diversification.»

The geographic spread improves, but the concentration problem remains.

Global Swiss companies are not enough

A common argument is that Swiss blue chips are already global businesses. Nestlé, Novartis and Roche generate a large share of their revenues abroad. So why invest internationally as well?

The answer: foreign revenues are not the same as international diversification.

A Swiss share remains a Swiss share. It is listed in Switzerland, is strongly shaped by the Swiss market environment and is subject to the same regulatory, currency-related and index-specific dynamics as other Swiss equities. Global revenues can cushion the risk. But they do not replace a direct investment in different markets, regions and economic cycles.

That is precisely where the value of true diversification lies: not all economies move in the same rhythm. Markets such as Japan, India or Brazil are driven in part by different factors than Switzerland, Europe or the US. They react differently to interest rates, currencies, commodity prices or political developments.

For Swiss investors, this can help reduce dependence on the domestic market.

Diversification requires more than foreign equities

But geographic spread alone is not enough. Many global equity indices are themselves highly concentrated. Those investing internationally should therefore pay attention not only to countries, but also to sectors, currencies, return sources and asset classes.
Private markets are becoming increasingly important here. Private equity, private credit, infrastructure and real estate can provide broader support for portfolios because they are not traded daily on the stock exchange and their performance depends more heavily on long-term fundamentals.

Large international endowment funds, such as those of Yale or Harvard, have for decades relied on a mix of listed assets and alternative investments. The reason is simple: different sources of return can help make portfolios more resilient.

«For Swiss investors, that means: what is needed is not less quality, but greater breadth.»

For Swiss investors, this point is particularly relevant. The domestic market is heavily shaped by a few large corporations and certain sectors. Private market investments can open access to areas that are scarcely represented on the Swiss stock exchange — such as infrastructure, specialised credit strategies, high-growth companies or international real estate segments.

Switzerland remains strong, but it is not enough on its own

Switzerland remains an exceptionally stable and attractive market. That is precisely why it provides a solid foundation for many investors. But a solid foundation is not the same as a complete portfolio.

No single market can permanently fulfil all tasks: protection against external shocks, real returns, broad risk diversification and low dependence on individual companies or sectors. Not even Switzerland.
For Swiss investors, that means: what is needed is not less quality, but greater breadth. Those who diversify their portfolios geographically, sectorally and across different asset classes are better prepared when markets become more challenging.

The decisive question, therefore, is not whether Swiss investors may trust their domestic market. They may. The more important question is whether they are giving it too much credit.

Wassim Jomaa is CIO at Petiole Asset Management.

• Read all previous texts by our guest authors here.