Swiss Manufacturing PMI Bounces Back: A Glimpse of Resilience Amid Persistent Headwinds

The Swiss Manufacturing Purchasing Managers Index (PMI) edged up to 48.8 in August 2025, a modest but meaningful improvement from July’s 49.6 [1]. While still below the 50 threshold separating contraction from expansion, this rebound signals resilience in a sector battered by 31 consecutive months of decline. The uptick was driven by rising purchasing prices, delivery times, and employment, suggesting pockets of activity amid broader stagnation [3]. However, the PMI’s failure to cross into expansionary territory underscores persistent headwinds, particularly U.S. tariff policies that have disrupted global supply chains and dampened export demand [4].

For investors, this nuanced data point raises critical questions about strategic positioning in Swiss equities and export-sensitive sectors. The Swiss economy, while outperforming the Eurozone, remains vulnerable to external shocks. UBS, a bellwether for Swiss financials, has slashed its Eurozone corporate earnings forecast for 2025 to a 3% contraction, citing currency headwinds and weak trade dynamics [1]. Yet the bank’s Q2 2025 results—marked by a $2.4 billion net profit and 4% revenue growth—highlight its ability to navigate volatility through cost discipline and client momentum [5]. UBS’s cautious optimism about a 5% Eurozone equity recovery in 2026 and a faster acceleration in 2027 [2] suggests a long-term view that could inform selective investments in Swiss high-quality dividend stocks, which offer historically competitive yields and strong profitability [3].

Historical backtesting of UBS’s earnings releases from 2022 to 2025 reveals mixed short-term performance. While 1- to 5-day post-earnings returns averaged ~1.8% (outperforming the benchmark), these gains dissipated after two weeks, turning negative by the 30-day mark [6]. This pattern suggests limited alpha generation from a simple buy-and-hold strategy around UBS’s earnings dates, reinforcing the need for investors to focus on long-term fundamentals rather than short-term volatility.

The export-sensitive sectors most exposed to U.S. tariffs—pharmaceuticals, machinery, and luxury goods—present a mixed picture. Swiss pharmaceutical giants Roche and Novartis, which account for 60% of U.S. pharmaceutical imports from Switzerland [2], are reshoring operations to mitigate risks. Roche’s $50 billion U.S. investment plan by 2030 and Novartis’s parallel onshoring efforts reflect a strategic pivot to secure market access amid potential 250% tariff threats [5]. Meanwhile, machinery firms like ABB and Sulzer are diversifying into Asian markets, where demand remains robust [5]. The luxury watch sector, hit by a 39% U.S. tariff, is adapting through price hikes and geographic reallocation, though mid-tier brands like TAG Heuer face projected 20–30% U.S. sales declines by 2026 [5].

Currency risks further complicate the outlook. The Swiss franc’s strength—bolstered by the SNB’s dovish policy and global uncertainties—has eroded export competitiveness [2]. With the SNB’s key rate at 0.25% and the ECB maintaining tighter policy, the CHF’s appreciation against the euro could deepen sectoral divides, disproportionately affecting small and medium-sized enterprises (SMEs) [1]. Investors should monitor hedging strategies and geographic diversification efforts, particularly in Asian markets where Swiss exports are gaining traction [5].

For strategic positioning, the data supports a dual approach:
1. Defensive plays: Swiss high-quality dividend stocks (e.g., Roche, Novartis) offer resilience through innovation and onshoring.
2. Growth opportunities: Machinery and electronics firms adapting to Asian demand (e.g., ABB, Sulzer) may outperform as U.S. trade tensions persist.

However, caution is warranted. The PMI’s rebound is fragile, and U.S. tariff policies remain fluid. Investors should prioritize companies with diversified revenue streams and proactive cost management, while hedging against CHF volatility.

Source:
[1] UBS slashes euro zone corporate earnings outlook for 2025 [https://www.reuters.com/markets/europe/ubs-slashes-euro-zone-corporate-earnings-outlook-2025-2025-08-22/]
[2] Strategy Outlook | UBS Global [https://www.ubs.com/global/en/assetmanagement/insights/asset-class-perspectives/hedge-funds/articles/q3-2025-uga-hf-strategy-outlook.html]
[3] Prepare for market volatility [https://www.ubs.com/global/en/wealthmanagement/insights/marketnews/article.2420728.html]
[4] Swiss Manufacturing Falls the Most in 13 Months [https://tradingeconomics.com/switzerland/manufacturing-pmi/news/460863]
[5] Trump's 39% US Tariff on Swiss Exports [https://www.ainvest.com/news/trump-39-tariff-swiss-exports-implications-swiss-equities-strategic-sectors-2508/]
[6] Backtest results: UBS earnings release impact (2022–2025) (internal analysis).