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Investing.com -- Switzerland’s economy remains structurally strong, supported by high productivity and innovation, solid institutions, and low public sector debt, according to a new report from BCA Research. These fundamental strengths continue to position the Swiss economy favorably in the long term.
Despite these structural advantages, near-term deflation risks are increasing in Switzerland. The research firm points to falling wages and softening labor market data as key indicators of growing deflationary pressure in the Swiss economy.
The Swiss National Bank (SNB) will likely implement monetary easing measures more aggressive than market expectations, BCA Research predicts. The firm anticipates the central bank will introduce negative interest rates and possibly intervene in currency markets to address these economic challenges.
Swiss equities face vulnerability in this environment, according to the report. BCA Research notes that Swiss stocks are currently trading at expensive valuations compared to historical norms and global peers.
The research firm also highlights that the Swiss equity market is overexposed to the pharmaceutical sector, which could become a target of potential US policy actions. This sector concentration adds another layer of risk to Swiss stocks despite the country’s overall economic strengths.
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