These are the stocks of companies that primarily generate their revenues in Switzerland and are likely to be spared from global turbulence.
Even companies like the Jungfrau Railways, which have become symbols of global tourism, could find favor with investors seeking domestic security.
It will take weeks for the fog of the global trade war initiated by Trump to clear. What is clear is that the significant uncertainty and the need to reconfigure supply chains are likely to result in a sharp slowdown in global economic growth, possibly a recession.
Many Swiss companies will also be affected. They are threatened with 31 percent tariffs – unless the Swiss government can negotiate them down. Experience in bazaar negotiation tactics is a plus when dealing with the Trump administration.
Faced with such prospects, some investors are divesting completely from stocks or at least focusing on companies that primarily generate their revenues in Switzerland. What could such a domestically-oriented portfolio look like?
Real Estate Stocks
Obvious candidates for this are real estate companies such as Allreal, PSP Swiss Property, Swiss Prime Site, or Zug Estates Holding. There is no more local business than the property market. Alternatively, the numerous listed real estate funds are also suitable – available in the form of ETFs as a single exchange-traded product.
These real estate companies generate their income from rental revenues of residential, commercial, and office properties domestically. They have already demonstrated their resilience to global disruptions during the Covid-19 pandemic.
In addition to demand for space, the prices of real estate companies mainly react to interest rate developments, which are extremely favorable. After the central bank recently lowered interest rates to 0.25 percent, it could reduce them to zero in June in response to the crisis. Even a return to negative territory is conceivable.
Either way, the shortage of investments is back. Real estate is gaining favor again among private investors, insurance companies, and pension funds. Even Implenia, Switzerland’s leading construction company, could benefit from this – although it generates a significant portion of its revenue in the rest of Europe.
Insurance and Banking
The insurance sector – as the name suggests – also promises relative security. And high dividend payments. While Swiss Re and Zurich are globally diversified, services are not the focus of the US government. Companies like Swiss Life, Baloise, Helvetia, or Vaudoise already generate a majority of their premiums in Switzerland.
Swiss banks, even those catering to international clientele like EFG, Julius Baer, or UBS, could even benefit from international uncertainty. In turbulent times, customers from around the world appreciate the safe haven of Switzerland along with its franc.
Particularly risk-averse investors may prefer the stocks or participation certificates of one of the listed cantonal banks.
Telecommunication Companies
Another secure – and high-yielding – investment are the two telecommunication companies Swisscom and Sunrise. No one will give up their mobile phone plan or internet connection because of Trump’s trade war.
Sunrise operates only in Switzerland and positions itself on the stock market as a dividend stock. While Swisscom now generates about half of its revenue in Italy, this is not a disadvantage in a transatlantic conflict.
Unfortunately, there are few publicly traded retailers in Switzerland. An exception is Mobilezone, which specializes in mobile phones and other telecom products. There is also a very limited selection in the energy companies: the stocks of BKW or Romande Energie are a viable option for investors.
Companies like Zurich Airport or the Jungfrau Railways, which have actually become symbols of global tourism, could also find favor with investors seeking domestic security.
Surprises are Possible
In a few months, we will likely be surprised to note that there will be unexpected winners of the trade war even among companies oriented towards global markets. One candidate could be SGS, whose core business – the inspection and certification of goods and services – is closely linked to global trade.
Paradoxically, new tariffs, sanctions, and more complex origin rules could also increase the demand for SGS services. Companies will soon need more evidence of where their products or individual components come from to avoid tariffs, penalties, or delays.
The impact on a freight forwarding company like Kuehne+Nagel – actually a classic beneficiary of globalization and trade – is not entirely clear. A decrease in exports and imports means fewer containers on ships and less cargo on planes. This would be detrimental to Kuehne+Nagel’s business, and indeed the stock was among the biggest losers on the Swiss stock exchange this week.
At the same time, logistics becomes more complex during trade conflicts. Companies need solutions to navigate new customs regulations, find alternative routes, or restructure their supply chains. Large providers like Kuehne+Nagel are well positioned to offer such services. We could see surprising movements on the stock market in the coming weeks.