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Tech stocks dominate in the US and Asia

Despite the often weak seasonal stock markets and new pharmaceutical tariffs, the stock markets managed to gain ground. This was also thanks to the interest rate cut by the US Federal Reserve. The rally around artificial intelligence (AI) is primarily driving tech stock prices in the US and Asia. We remain constructive and are increasing our position in the US technology index Nasdaq, while taking some profits in emerging markets (EM). We remain slightly overweight in pharmaceutical companies following the latest, rather vague announcement of US tariffs.

Author: Nicola Grass

Semiconductor manufacturers are among the stock market winners (picture: istock.com).

What changes have we made to the portfolios?

Emerging market equities are performing strongly (+28% in USD in 2025). Chinese tech stocks in particular are benefiting from the global AI rally, with Alibaba, for example, gaining 50% in September. We remain constructive, but are realising some of the gains.

US tech companies continue to deliver sensational profits (+24% in 2025) with high margins (>50%) and strong prospects. The AI rally is likely to continue despite high valuations. This is thanks to the dominant position of tech companies and expected further interest rate cuts by the Fed.

British equities remain cheaply valued and the sector mix is attractive. However, after a sensational start to the year, momentum is now lacking and the defensive nature of these stocks is not currently in demand. We are therefore closing this tactical regional bet.

British government bonds (AA rating) offer a very high carry of 4.7%, but budget discussions are weighing on them. We see more return opportunities in Australia (AAA rating) and also prefer the AUD. We are doubling our position in Australian government bonds and moving to the sidelines on GBP bonds.

USD/CHF well below 0.80 until mid-2026 remains our conviction. However, too many interest rate cuts by the US Fed are currently priced in. We are therefore reducing our strong underweight position. At the same time, we are underweighting the yen. We do not anticipate any interest rate hikes due to falling inflation rates.

Equity markets: Rally despite resistance

September is traditionally the weakest month of the year on the stock market. In 2025, however, it defied the odds and the equity markets continued to rise. The Fed's interest rate cut (-25 basis points) gave the global AI rally further momentum. Thanks to new partnerships and lenient antitrust rulings, the American IT and telecoms sector in particular, with companies such as Oracle and Micron (both +40%) and Alphabet, were among the clear winners. Nevertheless, our sentiment indicators show no signs of euphoria, and the fundamentals remain solid. We are therefore increasing our tactical position in the Nasdaq and remain overweight in convertible bonds, which have a bias towards smaller IT issuers.

Emerging markets: tech stocks at the forefront

Tech stocks also performed well in emerging markets (see chart). Alibaba's share price shot up by an impressive 50% in September thanks to increased investment in AI infrastructure. The MSCI EM Index reached its 2007 highs and is approaching its all-time high of 2021. A weak USD, robust economic data (+4.1% GDP in 2025), low inflation (3.2%) and falling key interest rates continue to provide tailwinds. Nevertheless, we are taking some profits after the strong rally, as earnings growth has not been able to keep pace and valuations have risen (P/E ratio from 12 to 14). We also expect growth in China to slow in the second half of the year. However, our overweight in emerging market bonds remains unchanged, as they continue to benefit from historically high real yields and a weak US dollar. EM bonds also have a different regional distribution than Asia-heavy equities.

 

Sources: Bloomberg, Zürcher Kantonalbank

Pharmaceuticals: Less bad than feared

Among the losers in September was the Swiss stock market, which suffered from the weak performance of heavyweights such as Nestlé and Novartis. However, the 100% tariffs on pharmaceutical imports into the US announced by US President Donald Trump are not the reason for this. Firstly, even higher tariffs had been feared, and secondly, Roche and Novartis could be exempt from these tariffs due to their already announced investments in the US. EU pharmaceutical companies, which account for 60% of US pharmaceutical imports, are also likely to be exempt. The markets reacted calmly to this news. We remain neutrally weighted in Swiss equities and are slightly overweight in global pharmaceutical stocks.

Alternative investments: attractive alternatives to CHF bonds

Swiss government bonds are once again offering negative yields on maturities of up to five years, and there is hardly any potential for returns at the long end either (10-year yields at 0.18%). Corporate bonds in CHF are performing slightly better, but we continue to see more attractive opportunities in alternative investments. We continue to overweight gold despite its sharp rise in price and are benefiting from high coupons on catastrophe bonds, which are performing strongly thanks to the absence of hurricanes. Private equity and liquid hedge fund trackers have also had a successful year and remain important diversifiers in our portfolios.

Our Tactical Asset Allocation (EUR) in October 2025

Relative weighting vs. Strategic Asset Allocation (SAA) in % in September and October 2025 (Source: Zürcher Kantonalbank, Asset Management)

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