The Swiss Market Index (SMI) outperformed the Euro Stoxx 50 by nearly 8 percentage points in October, marking the largest gap since March 2020. While the SMI rose by 4.6%, the Euro Stoxx 50 declined by 3.2%. Analysts attribute this shift to rising borrowing costs, political instability in France and Spain, and waning confidence in AI-related investments.
Three major companies account for the entirety of the SMI's October gains and represent nearly half of the index's total value. Roche shares increased by 12%, Nestlé rose by 10%, and Novartis grew by 6.7%. Investors are increasingly prioritizing profitable firms with robust balance sheets as a defensive strategy against market volatility.
This movement coincides with a significant global selloff in the AI and semiconductor sectors. Between October 12 and 15, twenty leading AI and chip companies lost over $1 trillion in market capitalization. Market participants cite concerns that elevated borrowing costs may negatively impact future AI spending, leading to a broader retreat from tech-heavy portfolios.
Data from Bank of America indicates that fund managers held their highest allocation to technology stocks since August 2020 during the first week of October. As the trend reverses, capital is flowing back into defensive sectors like healthcare. Switzerland currently ranks second in European fund manager surveys, trailing only Spain in regional allocation preferences.
