Anticipating SNB Rate Cuts: Why CHF Assets Are Poised for Gains in a Low-Inflation Era

The Swiss National Bank (SNB) is on the brink of a critical decision—one that could reshape the landscape of CHF-denominated assets for years. With inflation tumbling toward zero and global markets bracing for policy shifts, now is the time to position for opportunities in Swiss bonds and equities. Here's why the SNB's next move will unlock value, and how investors can capitalize.

The Inflation Slide: A Catalyst for Policy Action
Switzerland's inflation rate has entered uncharted territory. In April 2025, annual inflation dipped to 0% year-on-year (YoY)—a stark contrast to the 2.1% peak in 2023—while core inflation (excluding volatile items like food and energy) hit 0.6%, its lowest since 2015. The IMF forecasts further declines, projecting inflation to average 1.03% in 2025, with a steady drift toward 1% by 2029.

This trend is not just statistical noise—it's a harbinger of policy action. The SNB's mandate to keep inflation below 2% is being tested as disinflationary forces gather steam. With the economy growing at just 0.2% in Q4 2024 and the Swiss franc (CHF) surging to multi-year highs against the dollar, the SNB faces mounting pressure to cut rates further.

The SNB's Playbook: Rate Cuts and Beyond
The SNB has already signaled its intent. In December 2024, it slashed rates by 50 basis points to 0.5%, the largest cut since 2015. Analysts now price in a 25-basis-point cut by June 2025, pushing the policy rate to 0%. But this is just the start.

The SNB's dilemma is clear: a stronger CHF—up 1.6% week-on-week in early 2025—threatens export competitiveness and domestic demand. With imported goods deflating at -2.5% YoY, the SNB may be forced to adopt negative rates again by year-end to weaken the franc.

Implications for Bonds: A Bull Market in CHF Debt
The bond market is already pricing in this pivot. Swiss government bonds with 10-year maturities now yield just 0.8%, down from 1.2% in early 2024. As rates fall further, bond prices will rise—a classic “flight to safety” dynamic.

Investors should prioritize long-duration CHF bonds, which benefit most from declining yields. The UBS Swiss Government Bond ETF (SWGG) offers exposure to this trend, while Swiss corporate bonds in sectors like utilities or healthcare—insulated from CHF strength—present additional yield opportunities.

Equities: Navigate the Sector Divide
For equities, the SNB's easing is a double-edged sword. Sectors sensitive to the CHF's strength—like exporters in pharmaceuticals (e.g., Roche) or machinery (e.g., ABB)—could rebound if the franc weakens. Meanwhile, consumer discretionary stocks (e.g., Nestlé or Swisscom) may see demand stabilize as lower rates boost spending.

However, banks like Credit Suisse or UBS face headwinds. Negative rates compress net interest margins, though their diversified global operations offer some insulation.

The Risks: Deflation and Global Spillovers
No opportunity is risk-free. A slide into deflation (negative inflation) could force deeper SNB interventions, including quantitative easing—a last resort. Additionally, geopolitical risks, such as U.S. trade policies or a China slowdown, could amplify disinflationary pressures.

Yet, the SNB's flexibility and the CHF's safe-haven status mitigate these risks. Even in a deflationary scenario, Swiss bonds would remain a haven, while equities in defensive sectors would hold up.

Conclusion: Act Now—Before the Rally Fades
The math is clear: declining inflation → SNB rate cuts → rising bond prices and equity selectivity. Investors ignoring this chain are leaving gains on the table.

Recommended Action:
1. Allocate 30% to CHF bonds via SWGG or similar ETFs.
2. Rotate 20% into Swiss equities, focusing on exporters and consumer staples.
3. Hedge against CHF volatility using currency forwards or inverse ETFs if the franc's strength persists.

The SNB's next move is not a question of “if,” but “when.” Investors who act swiftly will secure positions in an asset class primed for a multi-year bull run.

The window is open—don't miss it.