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Economic Forecasts: Swiss Banks Were Too Optimistic

By George DorganMarket OverviewJan 03, 2016 12:51AM ET
Economic Forecasts: Swiss Banks Were Too Optimistic
By George Dorgan   |  Jan 03, 2016 12:51AM ET
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Our analysis of the forecasts of economic data for 2015 shows that the Swiss banks were too optimistic for most data. US growth, the oil price, inflation and interest rates were far lower in 2015 than they expected. The forecast errors for stock indices and unemployment, however, were smaller.

In December 2014, the Neue Zürcher Zeitung (NZZ) published the forecasts of the leading Swiss banks for the year 2015. United Bankshares Inc (O:UBSI), Credit Suisse (VX:CSGN), Julius Bär, die ZKB, Raiffeisen Bank Internat. AG (L:0NXR), Pictet und J. Safra Sarasin participated.

We would like to know where the banks were correct and where they got wrong.

Forecasts And Reality
Forecasts And Reality

Forecasts of Swiss banks and reality in 2015


As for the EUR/CHF, all the banks were wrong. They saw the EUR/CHF rise from 1.20 to around 1.23. But the pair ended the year at 1.0881.
USD/CHF: The banks were more successful with the dollar. They thought that the dollar remained around parity with the franc. It was 0.98 in December 2014 and finished the year 2015 at 1.0026.


The banks expected the Swiss economy to perform better than the euro zone, +1.7% versus 1%. That a stronger economy often leads a stronger currency, got ignored. They overestimated growth in the United States with 3.1% versus the real value of around 2%. But they underestimated the growth in the euro zone, that is in the third quarter was at 1.6% By Q3/2015, the euro zone growth rate was stronger than the Swiss one.

Stock Indices

Banks were over-optimistic for stock indices. They saw the SMI around 9500, while the Swiss index got hit by the end of the euro peg. The SMI ended the year at 8818, a minus of 1.4%. After the initial shock to 7900 points, the index had recovered to 9300 points in March.

The estimates for the DAX were correct with an end value of 10700, while the opinion about the S&P500 was too optimistic. The S&P 500 ended the year at 2044, while the Swiss banks forecasted it at 2150.

Unemployment Rate and Purchasing Power

The Swiss unemployment rate was at 3.4% in November 2015 and therewith higher than the expected 3.1%. On the contrary, the banks thought that U.S unemployment rate were higher. The U.S. unemployment rate is 5%, while their guess was 5.3%. Weaker oil prices translated in higher purchasing power, more demand and, in particular, more jobs.

The Swiss, however, concentrate on exports. Their part of consumption in the GDP is 66% versus 80% for the U.S. Similarly to the 1970s, when the franc strongly appreciated, firms were initially reluctant and stopped hiring. The positive effect of a stronger franc on purchasing power and consumption takes more time.


The biggest gap was in the commodities area. Banks expected WTI and Brent between 65 and 70$, while both benchmarks ended the year around 37$.


Already for years, banks overestimate inflation. They expected euro zone inflation at 0.7%, while the reality is 0.15%. For the U.S., they saw the CPI at 1.5%, the reality is 0.5%. This difference cannot be explained only with the lower oil price.

Interest rates

Banks not only overestimated growth, commodity prices and inflation, but also interest rates. They expected the 10 year yield of treasuries at 2.7%, the reality is 2.2%. For German Bunds, they missed the reality of 0.6% with their forecast of 1%. For Switzerland they got wrong even more: They judged that Swiss rates were at 0.6% but the 10-Year Eidgenossen ended 2015 at minus 0.07%.

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Economic Forecasts: Swiss Banks Were Too Optimistic

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Economic Forecasts: Swiss Banks Were Too Optimistic

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