Market overview: Between the AI boom and inflation fears

The bond markets continued to come under pressure last month, particularly in the USA and UK. Above all, concerns about renewed rises in inflation had a negative impact.

Indexed performance of government bonds in local currency

100 = 01.01.2026

The conflict in the Middle East continues to weigh on bond markets. The resulting rise in energy prices is reflected in higher inflation worldwide. Overall inflation now stands at 3.8 percent in the USA, while it has climbed back to 3.0 percent in Europe. Consequently, interest rates have risen along the entire yield curve, particularly at the short end. Higher inflation rates have also led to concerns about a prolonged period of restrictive monetary policy. Accordingly, government bonds have recorded negative performance since the start of the year.

Trend in 10-year yields to maturity

In percent

The persistently high oil price is exacerbating inflation in many countries and has caused interest rates to rise significantly, particularly in the USA and UK. At over 4.5 percent, yields on 10-year US government bonds are back at their highest level since May 2023. In the UK, inflation concerns as well as political uncertainty and speculation over Starmer in the run-up to next month’s budget decision weighed on the bond market. The yield on 10-year gilts rose to 5.1 percent, reaching its highest level since June 2008.

Credit spreads on corporate bonds

In percentage points

Credit spreads on corporate bonds narrowed significantly again after rising temporarily in the wake of the Middle East conflict. This development likely benefited in particular from a renewed sense of optimism on the stock markets. Risk premiums are currently at a historic low again, signalling that market participants only have minor concerns about the economy.

Global equity markets continued their recovery, leading to new record highs in many places. This development was mainly driven by tech stocks. However, rising interest rates and concerns over high valuations in the tech sector have slowed momentum somewhat recently.

Indexed stock market performance in Swiss francs

100 = 01.01.2026

Until mid-April, global equity markets were still heavily influenced by the uncertainty surrounding the Middle East conflict. Since then, however, most markets have enjoyed a substantial recovery rally, mainly driven by tech stocks. After a brief lull, the euphoria surrounding artificial intelligence returned to the equity markets, which reached new all-time highs in many places. Equity markets in the USA and emerging markets were particularly dynamic, while Europe and Switzerland lagged somewhat behind. However, the ongoing increase in volatility indicates that the recovery remains fragile. Uncertainty about a sustainable solution to the Middle East conflict, the blockade of the Strait of Hormuz and the high valuations of many tech stocks are having a particularly negative impact. As a result, momentum has weakened slightly recently.

Momentum of individual markets

In percent

At present, momentum on the global equity markets is generally positive. This trend is particularly evident in tech-driven markets such as South Korea and Taiwan. South Korea remains the strongest stock market since the start of the year. Measured in Swiss francs, it has risen by around 100 percent, driven by the tech companies SK Hynix and Samsung. In the eurozone and Switzerland, momentum also continues to be positive but remains at a relatively low level.

Price/earnings ratio

The price/earnings (P/E) ratio also fell during the global stock market correction in March. However, this moderate correction has now been reversed by the strong equity market recovery. Even the strong first-quarter reporting season was unable to curb this trend. For example, the US stock market achieved its best result since the COVID-19 pandemic, rising by over 27 percent on an annual basis. One exception was the Swiss equity market, where the P/E ratio recovery was not as strong as the global markets.

Exchange-listed Swiss real estate funds came under pressure last month and fell sharply in value. Consequently, annual returns are slightly negative.

Indexed performance of Swiss real estate funds

100 = 01.01.2026

Exchange-listed Swiss real estate funds fell sharply last month. After a year marked by sharp fluctuations, annual returns are now moderately negative, which is not entirely surprising. On the one hand, Swiss capital market interest rates are significantly higher than at year-opening due to rising inflation caused by higher energy prices. On the other, Swiss real estate market valuations are still seen as high, which makes the funds vulnerable to price setbacks. Despite the recent correction, distribution yields remain an attractive source of income.

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

In percent

The premium that investors pay for exchange-listed Swiss real estate funds compared to the net asset value remains at a high level. Historically, such valuations have been closely linked to Swiss capital market interest rates and typically only observed in times of negative interest rates. Given the recent rise in interest rates, current valuations appear comparatively high, but they are likely to remain underpinned by stable demand for Swiss real estate investments.

3-month SARON and 10-year yields to maturity

In percent

Yields to maturity on 10-year Swiss government bonds have risen moderately again recently. This is mainly due to rising inflation in Switzerland, which has climbed from 0 to 0.6 percent in the last few months. Investors are demanding a higher yield to offset the rise in inflation. So far, however, the renewed rise in inflation has not led to any change in monetary policy, which is why the 3-month SARON has remained unchanged. Market participants expect the SNB to raise the policy rate slightly in future, but as inflation is still comfortably within the SNB’s target range, there is no real pressure to do so.

Find out more in our interest rate forecast for mortgages.

Currencies

The Swiss franc once again strengthened slightly against the euro last month, whereas it remained stable against the US dollar. Over the year to date, the Swiss franc is around 2 percent stronger against the euro and over 1 percent stronger against the US dollar.

Source: Allfunds Tech Solutions

In March, the Swiss National Bank intervened on the foreign exchange market to counter the strong appreciation of the Swiss franc, particularly against the euro. However, much of this effect was reversed during the past trading month, when the Swiss franc made up ground against the euro again. Overall, the US dollar was unable to continue benefiting from its safe-haven status and trended sideways over the course of the month.

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

Gold

The gold price temporarily halted the sharp decline seen in mid-March. However, higher interest rates continue to create headwind.

Indexed performance of gold in Swiss francs

100 = 01.01.2026

The gold price has already undergone two major corrections this year. It recovered from the first, but not completely from the second, which came about mainly after the outbreak of the Middle East conflict. Persistent concerns over inflation and market participants’ associated fears about higher interest rates are likely capping gold prices at the moment. However, the return on gold, measured in Swiss francs, is still around 6 percent over the year.