The Swiss National Bank (SNB) raised its key interest rates from -0.75 to -0.25 percent on Thursday. This follows the unexpectedly high rate hike of 0.75 percentage points by the US Federal Reserve on Wednesday and the announcement by the European Central Bank (ECB) last week that it will raise its key interest rate in July.

In our last investment compass, we pointed out that the SNB would probably respond with an interest rate hike on 16 June. As a conclusion, we had urged caution in CHF bonds and also in the equity market and underweighted both asset classes. This assessment has proven to be helpful. Swiss bonds have lost a good 5 percent in recent weeks, while the equity markets corrected even more strongly.

The SNB's interest rate move does not change our outlook for the general market development. As long as the economy remains intact, further interest rate steps and further increases in capital market interest rates can be expected. This could put further pressure on bond and equity markets. We were already prepared for this scenario with the positioning of our portfolios.

At the same time, however, international recession risks have increased and could grow in Switzerland as well due to higher inflation, higher interest rates and a stronger exchange rate. Although a new recession could lead to a turnaround in the bond market, the equity markets would probably suffer in this scenario as well. For the time being, we therefore stick to our recommendation to remain patient and keep risk in portfolios low.