What moved and why it matters
Switzerland's blue chips are having a moment. The SMI has risen 4.6% in October as the Euro Stoxx 50 has slipped 3.2%, leaving the Swiss index ahead by nearly eight percentage points, the biggest edge since March 2020 when the pandemic shock pushed investors toward havens.
The heavyweights did the heavy lifting. Roche is up 12% this month, Novartis has climbed 6.7%, and Nestlé has advanced 10%. Because those three names make up close to half of the index, their gains have powered the benchmark higher. Smaller members joined in, with Givaudan and Galderma posting the strongest increases among the rest, while only four SMI listings are lower in October - and those are the more economically sensitive ones.
The pivot to defensives
Across Europe, money has rotated toward businesses that hold up better through economic ups and downs. Investors have been favoring high profitability companies with sturdy finances and less sensitivity to higher borrowing costs. This rotation has occurred amid higher borrowing costs, growing doubts about the artificial intelligence trade, and political strains in nations such as France and Spain.
"Investors like the defensiveness of Swiss stocks and are actively looking for alternatives to the crowded AI trades," said Damian Burkhardt, who leads Swiss equities at EFG Asset Management. "Healthcare was the funding sector for the AI trade and that is reversing now." Sentiment has shifted as well, with the most recent Bank of America Corp. fund manager poll indicating that a net 16% now rank Switzerland as their most preferred European market.
Valuations, currencies and earnings
This turnaround comes after a lean period for the Swiss index, which has relatively little exposure to this year's leaders in energy and technology. Over this decade, it has delivered a 69% total return in local currency, including dividends, while the Euro Stoxx 50 has doubled.
Earnings expectations are a tailwind. Bloomberg Intelligence data point to 10% profit growth for 2027, which is projected to be almost twice the pace anticipated for this year. Yet the recent pop has a price: the SMI has returned to what can be considered expensive territory compared with its own past decade, and it is the priciest versus the Euro Stoxx 50 in almost two years.
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Currency moves help, too. A weaker franc has aided Switzerland's export dependent large caps, and the dollar cross has returned to territory last observed in the first half of 2025. Over the past seven months, the franc also lost ground versus the euro, but it clawed back some of that move this month as traders looked for protection amid political strains in the euro area, especially in France.
The setup from here
According to Bank J Safra Sarasin's equity strategist, Wolf von Rotberg, the drivers of Swiss equity performance are usually interest rates, the dollar, and a topping macro cycle; this month he raised his rating on the country to outperform. "All three factors have lately worked in the SMI's favor," he said. "The roll-over at the beginning of the month came on the back of a peak in US macro momentum and provided the perfect backdrop for a recovery in beaten-up Swiss equities."
The bottom line: a clearer tilt toward defensives, a weaker franc and firmer long term earnings hopes explain why Swiss large caps have outpaced the euro zone by nearly eight points this month. For portfolios with Europe exposure, the mix is supportive for Swiss quality, but richer valuations raise the bar for what comes next.
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