UBS Forecasts Further Gains for Swiss Equities in Second Half of 2026

The Swiss Market Index (SMI), which gained just over 10% in the first half of the year, has further room for growth in the second half of 2026, according to an outlook from UBS Switzerland AG.

Earnings Outlook Supports Higher Valuations

The bank projects earnings growth of 8% for Swiss-listed companies this year, a figure that aligns with current market consensus. For next year, however, UBS's forecast is more conservative at 5% growth, which is below the current consensus estimate.

The SMI is currently trading at a price-to-earnings (P/E) ratio between 17x and 18x, slightly above its long-term average of approximately 16x. According to the bank, this premium is justified as companies within the index are demonstrating higher profitability than the average seen over the past 20 years.

Macroeconomic Tailwinds

The positive outlook is bolstered by improving macroeconomic indicators. UBS noted that manufacturing purchasing managers’ indices (PMIs) in both Switzerland and the U.S. have climbed above the 50-point threshold since March, signaling an expansion in the manufacturing sector for the first time in over three years.

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Investor Strategy

Looking ahead, UBS anticipates that the typical summer period from June to September could bring increased market volatility. In a note to clients, Stefan R Meyer, CIO Equity Strategist for Switzerland at UBS, suggested that investors should view any pullbacks as potential buying opportunities rather than chasing short-term rallies.

Key recommendations from the bank include:

• Focusing on quality companies with high and stable profitability.
• Considering select mid-cap and cyclical stocks.
• Taking advantage of the Swiss market's attractive dividend yield, which currently stands at around 3%.