Market overview: Financial markets remain optimistic

Bonds trended sideways overall, caught between concerns about inflation and the prospect of a less restrictive monetary policy in the USA.

Indexed performance of government bonds in local currency

100 = 01.01.2026

Following significant ups and downs, government bonds as a whole trended sideways last month. Geopolitical tensions and recurring hopes of their easing produced sharp fluctuations in the oil price. After it’s temporary rise to back above 90 US dollars, concerns about inflation and interest rates flared up again. More recently, however, government bonds again recovered as weaker US economic data and an easing of price pressures dampened interest rate concerns.

Trend in 10-year yields to maturity

In percent

Yields to maturity on 10-year government bonds changed little month-on-month, although they did fluctuate significantly over the course of the month. This was particularly pronounced in the USA, where the yield to maturity rose at times to over 4.7 percent. In addition to higher oil prices, uncertainty over the US Federal Reserve’s future policy created upward pressure. Long-term interest rates also rose in Switzerland. The yield to maturity on 10-year Swiss government bonds rose to over 0.5 percent, but is now back below 0.4 percent.

Credit spreads on corporate bonds

In percentage points

Credit spreads on corporate bonds remained virtually unchanged last month. In the USA, the eurozone and Switzerland, credit spreads remain at historically very low levels. The markets are still factoring in a distinctly favourable credit environment. The potential for any further narrowing of credit spreads therefore remains limited, while they could quickly widen if the economic environment deteriorates.

Overall, equity market performance was positive last month, bolstered by a strong reporting season, which added new impetus at the end of July, in particular to previously weakening tech stocks.

Indexed stock market performance in Swiss francs

100 = 01.01.2026

Overall, the performance of the equity markets was encouraging last month. The positive trend was driven mainly by sectors outside the technology industry to begin with, before previously weaker tech stocks also made significant gains at the end of July, helped by tailwinds from a strong reporting season. In particular, Amazon and Microsoft’s cloud businesses did well, to some extent allaying concerns about high levels of AI investment. The Swiss equity market performed poorly by comparison, weighed down in particular by Nestlé’s subdued interim results.

Momentum of individual markets

In percent

Momentum on the international equity markets remains positive overall. In South Korea and Taiwan, however, momentum slowed significantly month-on-month. Towards the end of July, their highly tech-heavy markets came under pressure as a result of growing doubts about the profitability of high levels of AI investment. While worries were eased by the strong reporting season, which recently led to a significant recovery, the previous price losses have not yet been fully recouped.

Price/earnings ratio

The latest reporting season was encouraging, in particular in the USA. However, share prices failed to keep pace with the strong earnings performance across all markets. In emerging market equities, worries about high levels of AI investment weighed on tech-heavy Asian share prices in particular, leading to a slight fall in the price/earnings ratio (P/E ratio). In Switzerland, price performance also lagged behind the gains, leading to a slight decline in valuations. By contrast, the P/E ratio for global equities continued to rise and is now well above its long-term average.

The prices of exchange-listed Swiss real estate funds fell last month, leaving them slightly down over the year as a whole.

Indexed performance of Swiss real estate funds

100 = 01.01.2026

In the face of rising oil prices and uncertainty about the US Federal Reserve’s future policy, capital market interest rates also rose significantly in Switzerland, weighing on exchange-listed Swiss real estate funds. With the subsequent fall in long-term Swiss interest rates to below 0.4 percent, real estate funds made something of a recovery, although not enough to fully recoup the interim losses, resulting in a slight decline month-on-month.

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

In percent

With the recent price losses and temporary rise in interest rates, the valuation of exchange-listed Swiss real estate funds has normalized somewhat. The premium paid compared to net asset value has fallen. Nevertheless, the valuation remains high by historical standards. However, given the continuing low interest rate levels in Switzerland, demand for exchange-listed real estate funds is likely to remain quite encouraging.

3-month SARON and 10-year yields to maturity

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

The yield to maturity on 10-year Swiss government bonds fluctuated significantly last month and is currently back below 0.4 percent, having briefly risen to over 0.5 percent. At the same time, price pressure remains low. Inflation fell from 0.5 to 0.4 percent in July, while core inflation remained unchanged at 0.3 percent. This means that there is little need for action on the part of the Swiss National Bank, and that the 3-month SARON looks set to remain close to its current level for the time being.

Find out more in our interest rate forecast for mortgages.

Currencies

The Swiss franc and the US dollar both lost value last month. By contrast, the Japanese yen made gains following coordinated intervention by the USA and Japan.

Source: Allfunds Tech Solutions

The Swiss franc lost value last month, as did the US dollar. Against the euro, the franc is now trading at around 0.94 – its weakest level since the start of the year. The performance of the Japanese yen was very different. Following its previous fall to a multi-decade low against the US dollar, the USA and Japan staged a coordinated intervention to support the Japanese currency. As a result, the yen has since made strong gains.

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

Gold

Having trended sideways for several weeks, the value of gold has risen significantly again recently. With an increase of over 8 percent, gold was the strongest asset class last month.

Indexed performance of gold in Swiss francs

100 = 01.01.2026

After steadily losing value since mid-March, the price of gold stabilized at around 4,000 US dollars per troy ounce at the end of June. This was then followed by a strong upward trend at the beginning of August. Gold is now trading at over 4,300 US dollars per troy ounce, having gained more than 8 percent in value over the past month. This was bolstered by growing expectations of a less restrictive US monetary policy. With the prospect of fewer policy rate hikes, the precious metal is more attractive compared to interest-bearing investments.