Switzerland’s investor sentiment dropped significantly in August, as the UBS sentiment index fell from 2.4 to -53.8. This sharp decline follows the US imposing a 39% tariff on Swiss exports at the start of the month. A report by UBS and CFA Society Switzerland reveals that nine out of ten analysts believe Swiss export momentum will worsen in the next six months. The export sub-index plummeted from -35.1 to -89.8 in the latest data.

Bearish Signals for Swiss Assets

With sentiment in Switzerland falling drastically, we see clear bearish signs for Swiss assets. This suggests strategies that could benefit from a decline, especially for the Swiss franc (CHF) and the Swiss Market Index (SMI), the country’s main stock index. The negative outlook is expected to worsen as the market absorbs the full effects of the US tariffs. A direct approach is to focus on the currency. We might consider purchasing put options on the CHF against the US dollar, expecting further weakness as demand for Swiss exports shrinks. Past trade tensions, especially in the late 2010s, showed how tariff announcements could lead to sharp currency moves, and it’s unlikely the Swiss National Bank will support a weakening franc. The SMI includes major multinational exporters like Nestlé, Roche, and Richemont, all of which will feel the impact of the new US tariffs. Thus, buying put options on SMI-tracking ETFs or shorting SMI futures offers a direct way to trade on this negative sentiment. Swiss exports to the US exceeded 60 billion francs annually in the early 2020s, especially in pharmaceuticals and watches, emphasizing the vulnerability of these major companies.

Market Volatility and Opportunities

This significant decline in sentiment indicates that uncertainty and market volatility are on the rise. We should pay attention to the Swiss Volatility Index (VSMI), which usually spikes during economic shocks. Buying call options on the VSMI or employing option straddles on the most affected export-oriented stocks could yield profits from the expected price swings. Additionally, this situation presents relative value opportunities, comparing Swiss assets to those in Europe. As capital likely moves out of Switzerland in search of stability, we may see the EUR/CHF exchange rate increase. A pair trade—going long on a broad European index while shorting the SMI—could protect against broader market risks while targeting the specific damage to the Swiss economy. Create your live VT Markets account and start trading now.

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