Incoming Swiss president wants new partnerships but deems the US ‘indispensable’

Guy Parmelin was re-elected Swiss president with 203 of 210 votes and says his government has prepared a draft mandate to negotiate a legally binding tariff agreement with the United States following a non-binding declaration of intent, signalling potential private investment in pharmaceuticals. He stresses Switzerland’s need to diversify partnerships (EU, US, China, India), warns domestic initiatives limiting immigration could harm the economy, and notes legacy shocks including Covid, the Ukraine war, the Credit Suisse crisis and a strong franc that weighs on exporters; the Federal Council plans to sign a new EU package in 2026 pending parliamentary and popular processes.

Analysis

Market structure: The immediate winners are large, R&D‑heavy Swiss pharma (Roche ROG.SW, Novartis NOVN.SW) which can retain high‑margin research while manufacturing migrates nearer end markets; US CDMOs (Thermo Fisher TMO, Catalent CTLT) are secondary beneficiaries from nearshoring. Losers are SME Swiss exporters and labour‑intensive manufacturing in CH—every 5–10% persistent CHF appreciation can shave ~100–300bps off operating margins for exporters, pressuring pricing power and market share. Cross‑asset: stronger CHF should cap Swiss equity returns, lift FX hedging demand, and keep Swiss government yields low; option vols in pharma will spike around capex/M&A announcements.

Risk assessment: Tail risks include a US policy reversal on the tariff pact (15–25% conditional probability) or a Swiss popular vote rejecting the EU package/immigration limits (20–30%), each causing abrupt trade friction and safe‑haven CHF flows. Time horizons: near term (0–90 days) = mandate drafting and company capex signals; medium (3–12 months) = announced factory investments and FX moves; long (1–3 years) = structural relocation of 5–15% manufacturing capacity. Hidden dependencies: cantonal permits, talent supply, and US political cycles; catalysts = US administration statements, pharma capex filings, referendum polling.

Trade implications: Tactical: overweight Swiss big‑cap pharma and US CDMOs while hedging CHF exposure. Prefer 6–12 month directional trades: buy ROG.SW and NOVN.SW (2–3% NAV each) and buy TMO (1–2% NAV). Use options: purchase 12‑month calls 10% OTM on ROG/NOVN sized to 0.5–1% NAV each to lever upside; hedge FX by shorting CHF via USD/CHF (target +5–7% move over 6–12 months, stop‑loss −3%).

Contrarian angles: The market may overstate permanent offshoring — high‑value R&D and IP are sticky; expect Swiss pharma multiples to compress less than manufacturing headcount. Conversely, referendum risk is underpriced: a shock vote could move CHF +5% in weeks and widen CDS; prepare liquidity and options hedges. Historical parallel: post‑banking secrecy adjustments led to sector consolidation, not collapse—expect M&A and CDMO demand growth, not wholesale industry exit.

Key Decisions for Investors

• Establish a 2–3% NAV long position in Roche (ROG.SW) and Novartis (NOVN.SW) within 30–60 days, targeting 12‑month upside of 10–20%; size at 2–3% because R&D resilience offsets manufacturing relocation; take profits at +20% or if company capex signals favour full relocation.
• Initiate a 1–2% NAV long in Thermo Fisher (TMO) or Catalent (CTLT) to capture nearshoring CDMO demand, hold 6–18 months; trim if company announces >10% incremental US capex already priced in.
• Hedge Swiss FX: enter a short CHF via USD/CHF position sized to offset ~1–1.5% NAV exposure (or buy EUR/CHF long) targeting a 5–7% CHF weakening over 6–12 months; place stop‑loss at a 3% adverse CHF move.
• Buy 12‑month calls 10% OTM on ROG.SW and NOVN.SW (notional ~0.5–1% NAV each) to lever upside around expected capex/M&A catalyst windows; roll or exercise before 12 months depending on vol and news flow.
• Reduce exposure to Swiss small‑cap exporters by 20–40% over the next 3 months (or hedge with short small‑cap Swiss ETF exposure) if CHF appreciation exceeds 3% in any 30‑day window or if referendum polling shows >40% support for immigration limits.