Swiss small caps
making a «Comeback»?
Dr. René Dubacher
Economics
Financial Markets
Readings
Since the early 2000s, Swiss small caps have outperformed the Swiss Market Index (SMI TR) by a cumulative 263%. In recent years, however, this outperformance has been curbed by the global rise of mega-cap technology companies and an overall uncertain market environment.
Since the early 2000s, Swiss small caps have outperformed the Swiss Market Index (SMI TR) by a cumulative 263%. In recent years, however, this outperformance has been curbed by the global rise of mega-cap technology companies and an overall uncertain market environment.
With the macroeconomic situation brightening and supportive political conditions, market leadership could once again become more broadly based – to the benefit of Swiss small caps (mid and small caps), which are also attractive due to their appealing valuations and expected recovery in earnings growth.
Chart 1: Performance of the SPIex and SMI (TR) indices since 2000
Brightening macroeconomic outlook strengthens mid and small caps
A combination of macroeconomic uncertainties, persistent inflationary pressures and recurring recession fears has meant that mid-caps have only been able to outperform large caps in phases since the COVID-19 pandemic, while additional trade tensions have weighed on the market environment and further increased investor risk aversion. However, a number of factors now point to a significant improvement in the overall environment, as fiscal stimulus in the US and Europe is having an increasingly supportive effect ( ). In the US, the "One Big Beautiful Bill" legislation, with its extensive tax incentives, is boosting both consumption and corporate investment, and thus domestic demand. Europe will also receive an economic boost in 2026, particularly from the large German economic stimulus package with a €500 billion infrastructure fund and higher defence spending, as well as from the NextGenerationEU programme, which is expected to boost growth in the eurozone by an estimated 0.2 percentage points in 2025–2026 and focuses on defence, green transformation and digitalisation. From a Swiss perspective, this is increasingly creating an environment that resembles a "Goldilocks scenario": an economic acceleration accompanied by more stable political conditions and limited systemic risks, which in turn favours broader market leadership and supports cyclical mid- and small-cap stocks in particular, which are currently attracting attention with attractive valuations and a foreseeable recovery in earnings growth.
Chart 2: Expected earnings growth in %
A favourable entry point?
Chart 3: Rolling returns for 12 months
Since the beginning of the 2000s, the SPIex Index has outperformed the SMI (TR) by a cumulative 263%. The rolling 12-month outperformance averaged 2.3%, making Swiss small caps an attractive component for long-term investors seeking both return potential and diversification. Against the backdrop of accelerating growth momentum, increasingly supportive economic policy measures and declining uncertainty, the latest phase of 12-month performance – currently at its historical average – suggests that a bottom may have been reached. In our view, this points to a potentially attractive time to increase allocation again.
