Market overview: Good start to the year despite negative news

The bond market was relatively calm last month. Neither heightened geopolitical tensions nor the US government’s pressure on the chair of the Federal Reserve led to any major fluctuations. 

Indexed performance of government bonds in local currency

100 = 01.01.2026

Overall, the bond market made slight gains last month. Given the global political situation, however, it remained remarkably calm. The tense geopolitical climate and pressure exerted by President Trump on the US Federal Reserve’s independence have had little effect on bond prices. As a result, the bond market showed almost no signs of a classic flight to safe investments. Lower-than-expected inflation in the USA for November and December also caused only slight changes in yields to maturity on government bonds. Similarly, the decline in eurozone inflation had little impact on yields to maturity. Only yields to maturity on German government bonds rose slightly. 

Trend in 10-year yields to maturity

In percent

In Switzerland, yields to maturity on 10-year Swiss government bonds rose slightly in the last few days of 2025, briefly reaching just over 30 basis points. This upturn reversed slightly at the start of this year, but at just over 20 basis points, yields remain slightly above their lows. In the first few weeks of the year, yields to maturity also fell slightly again in Germany, where they were just below their annual highs at the end of December. In the USA, meanwhile, yields to maturity remained largely unchanged at around 4.2 percent, despite further policy rate cuts in December last year. Only in Japan did interest rates rise significantly again after the policy rate hike to 0.75 percent, and are now well above the 2 percent mark.

Credit spreads on corporate bonds

In percentage points

Despite growing signs of an economic slowdown in the USA and ongoing geopolitical uncertainty, credit spreads on corporate bonds have remained remarkably stable so far. They are still close to historic lows, indicating that market participants are not greatly concerned.

Prices on the global equity markets rose sharply last month and have continued to do so since the start of the year. 

Indexed stock market performance in Swiss francs

100 = 01.01.2026

Equity markets worldwide have maintained the momentum of last year, enjoying a very encouraging start to the new year. Emerging market equities in particular have made strong gains, as they did last year, and are already 4 percent higher than at the start of the year. Swiss equity markets ended last year on a strong note, driven mainly by the pharmaceutical company Roche. This year, however, the Swiss market is lagging slightly behind other countries. This is mainly due to the weak performance of index heavyweight Nestlé, which fell significantly after a recall of infant formula. In general, equity markets appear largely unaffected by international geopolitical tensions in Venezuela and Iran.

Momentum of individual markets

In percent

Momentum on the stock markets is largely positive at present, and especially strong on tech-heavy equity markets outside the USA. South Korea, Taiwan and the Netherlands stood out in particular, all recording significant gains. In South Korea, Samsung Electronics and SK Hynix played a crucial role in this increase. By contrast, the major US tech stocks are still struggling at the start of the year. The Japanese market also recorded significant growth, boosted by the weakness of the Japanese yen.

Price/earnings ratio

The price/earnings ratio on the global equity markets rose again last month. The increase was particularly pronounced in emerging markets. This development was mainly driven by strong price gains, while earnings estimates were adjusted less sharply. The upcoming reporting season should provide more clarity on companies’ earnings performance.

Exchange-listed Swiss real estate funds appear to have experienced some headwind last month in light of higher capital market interest rates, making only slight gains overall.

Indexed performance of Swiss real estate funds

100 = 01.01.2026

Exchange-listed Swiss real estate funds performed very well last year, rising by over 11 percent. Significant gains were made, particularly in the spring and summer of last year, largely supported by further monetary easing from the SNB and falling capital market interest rates. However, the pace has slowed since last month. This was likely due primarily to the further rise in capital market interest rates in December.

Premium on Swiss real estate funds and 10-year yields to maturity

In percent

The premium paid on investments in exchange-listed real estate funds compared to the net asset value of the underlying properties rose again slightly last month. This was despite the fact that capital market interest rates in Switzerland also moved slightly higher last month. A look back over the past 20 years shows that premiums typically rise when capital market interest rates fall and tend to fall when interest rates rise. However, demand for real estate funds is likely to remain strong, given the ongoing low interest rate environment and the low prospect of rapid change, particularly from institutional investors looking for alternative sources of income in a low-yield environment on the capital markets.

Vacancy rate and real estate prices

100 = January 2000 (left) and in percent (right)

Real estate prices continued their upward trend in the third quarter, with the price of single-family homes rising particularly sharply. The main drivers of this development were the continued low capital market interest rates and high demand, coupled with limited supply – which is also reflected in the low vacancy rate. By contrast, the trend in the rental flat segment was slightly more moderate. The reduction in the reference interest rate last March is likely to have had a dampening effect on prices. With the further reduction in September 2025, this effect is likely to continue this year.

Currencies

Gold is continuing last year’s rally unabated, reaching another new record high this month. By contrast, the Japanese yen remains weak, while the US dollar has recovered slightly against the Swiss franc since the start of the year.

Source: Allfunds Tech Solutions

Last month, the Japanese yen continued its downward trend against virtually all G10 currencies. It now stands at over 158 yen against the US dollar. This weakness may stem from speculation that Prime Minister Sanae Takaichi will seek an early election and could then pursue her expansionary fiscal policy even more vigorously. In contrast, the Swedish krona continued to strengthen, rising by almost 1.5 percent against the Swiss franc. This strength is likely due to the significant fall in Sweden’s inflation. While this stood at over 1 percent in August, it has now declined to 0.3 percent.

^{Source: Allfunds Tech Solutions, Coin Metrics Inc}

Gold

The gold price measured in Swiss francs has already risen sharply this year and currently stands at 3,690 Swiss francs per troy ounce.

Indexed performance of gold in Swiss francs

100 = 01.01.2026

At the end of December, increased margin requirements likely led to a sharp short-term decline in the gold price. However, the precious metal made a rapid recovery, rising by almost 8 percent in the first days of the new year. The global geopolitical situation, dominated by the US military intervention in Venezuela, the threatened annexation of Greenland and possible military intervention in Iran, may have supported the gold price. Moreover, Trump’s continued pressure on Powell, the US Federal Reserve chair who is facing a criminal investigation, seems to be bolstering precious metal prices and highlighting their role as a safe haven in uncertain times.