“I Consider Upside Surprises in Economic Growth Possible in 2026”

I’m cautiously optimistic. I consider euphoria to be just as overblown as the currently widespread pessimism is.

The rising equity prices at the moment are based mainly on hopes of future returns on stocks connected with artificial intelligence. That will cool down sooner or later. And the pessimism about the state of the world is – frankly speaking – hard for me to endure because it’s simply wrong historically.

What we’re experiencing at present is completely normal from a historical perspective. Uncertainty, a lack of clarity, and severe conflicts have always existed, even during the last 30 years, a period that gets romanticized as a stable time from today’s point of view. Yet, think of the war in Yugoslavia in the 1990s, the stock markets crashes in 2001 and 2008, the invasion of Iraq, or COVID.

Compared to truly dramatic times, the world today hasn’t gone completely off the rails. We’re currently witnessing locally confined crises that could very well be resolved swiftly. If the war in Ukraine, for instance, gets resolved this year, sentiment could brighten very quickly.

Likewise without grounds, historically speaking. Technological revolutions throughout history have recurrently sparked fears of mass unemployment, but thus far those trepidations have always been wrong. Thousands of professions, including highly skilled ones, indeed disappeared, but many new professions came into existence.

Global competition forces ceaseless efficiency improvements, but we nonetheless do not see mass unemployment. On the contrary, over the last 30 years, the number of wage earners has increased from around 2 billion to approximately 3 billion. We are not running out of paid work.

That can be ruled out in the near term. The soaring debt is alarming, but governments still have time. Moreover, a drastic fiscal policy retrenchment isn’t needed, only a course correction is necessary.

Here, too, it pays to look at history. In the aftermath of the Napoleonic Wars and World War II, the United Kingdom’s public debt load amounted to 260% of the country’s GDP. Both times the debt was paid down substantially afterwards, proving that it is possible to do so.

A distinction has to be drawn between the domestic economy and the export sector. The domestic economy depends greatly on aggregate consumer spending, which in turn depends on immigration. If immigration stays high, the domestic economy prospers.

A growth of 1% is modest, but it’s only a forecast. I think upside surprises are possible, driven mainly by the USA. Tax cuts took effect there at the start of this year, and a get-up-and-go spirit currently prevails there. That is likely to put a tailwind behind the world economy and, by extension, Switzerland’s export sector. The situation is bound to become more difficult, though, for parts of the export sector due to US tariffs, the slump in Germany, and the strong Swiss franc.

No, I’m not that pessimistic. Growth is bound to turn out less spectacular than that of the last 20 years, but an exodus is unlikely to occur. I see more of a gradual offshoring. Many investments in the USA were already in the planning anyway. It’s clear, though, that Switzerland will lose importance as a production base. That makes it all the more important to stay ahead in research and development and to improve underlying business conditions.

It depends on how the legislature would implement the initiative. When the initiative on mass immigration passed in 2014, Parliament eschewed a just implementation. That served the interests of the business community, but caused a lot of harm on the domestic policy front. I suspect that Parliament will react similarly again, but if it does, voters will surely reject the proposed new treaty package with the European Union.

Yes, they do. But if a tech bubble in the USA bursts, that would also affect Switzerland, though the impact would be more comparable to the end of the dotcom bubble in 2001 and would be less severe than the 2008 real estate and financial crisis.

Speaking of real estate, I don’t see an acute danger of a property bubble at present. Population growth would have to slow down sharply for several years to prick a potential bubble. But even then, a substantial price decline wouldn’t be assured because the housing vacancy rate is very low.

I’m an economic historian, not an investment advisor. But in my opinion, those who would like to partake in the economic growth should stay invested in the stock market in 2026 and shouldn’t park all of their money in a savings account or buy only bonds, especially since the interest-rate level looks set to stay low. And if and when markets wobble, keep calm. We’re in the middle of a technological revolution that is increasingly sweeping Europe. What’s crucial isn’t whether these forces are at work – what matters more is how well we succeed in harnessing them.