Nannette Hechler-Fayd’herbe on the implications of Trump’s inauguration and economic outlooks for Europe and Switzerland in 2025

Article published in Blick, 2 January 2025.

Looking out from Nannette Hechler Fayd’herbe’s boardroom, the view of Lake Zurich is somewhat more attractive than the current state of the global economy. Europe is in crisis, with the two driving forces – Germany and France – primarily preoccupied with elections. The European economy will have to wait a long time for political stimuli. At the same time, Donald Trump (78) is set to turn the global economy upside down from the end of January, having said he wants to reindustrialise the USA by any means necessary.

What does this mean for Switzerland and its economy – for jobs, wages and consumption? In this interview with Blick, Switzerland’s largest daily newspaper, Nannette Hechler-Fayd’herbe, Chief Investment Officer for EMEA at Geneva-based private bank Lombard Odier, has the answers.

There are troubled times ahead. How deep are your worry lines?

Not that deep. My alarm bells would ring if companies could no longer get credit on the markets or if the property market threatened to overheat. Prices for flats and houses have risen sharply in Switzerland, but we are still a long way from overheating, despite the SNB’s rapid interest rate cuts. It was very different in the days of negative interest rates.

We are only one or two rate cuts away from negative interest rates.

So far, the SNB has focussed on interest rate policy rather than monetary policy. There is a lot to be said against a rapid return to negative interest rates. Before the SNB resorts to this unpopular tool, it will probably try to intervene more strongly in the foreign exchange markets. And negative interest rates will only really be considered when interest rates in the euro or dollar zone are close to zero.

For 2025, we assume that the key interest rate is likely to be 0.25%

In other words, a further interest rate cut in March is not your most likely scenario?

The SNB has taken a big step as a preventive measure, and will wait and see what effect this has on inflation and the Swiss franc. For 2025, we assume that the key interest rate is likely to be 0.25%.

Interest rates may be low, but house prices are exorbitantly high in many places. Has the dream of owning a home been dashed for most people in Switzerland?

That’s true for hotspots like Zurich or Geneva. But there are regions where property is still affordable thanks to low interest rates.

Read also: Swiss real estate offers opportunities as interest rates decline

Which ones?

Municipalities that are further away from the urban centres. For a good connection to Zurich, you can still find affordable residential property in the Zurich Oberland or the neighbouring canton of Aargau. Glarus, Uri and St. Gallen also offer affordable alternatives – though they have the disadvantage of longer commutes to Zurich.

Low interest rates are good for borrowers, but bad for savers. What alternatives are there to money in an account?

A good approach is to have a mixed portfolio – in other words, a portfolio that includes a number of different asset classes. This is not entirely risk-free, as there is no return without risk, but with the right mix, the risk can be spread.

What should I put in such a mixed portfolio?

That depends on your risk tolerance and your age. A twenty-year-old has a completely different investment horizon than a sixty-year-old. At an older age, the main focus is on preserving value, whereas young people can pack more equities into their investments.

What about property funds?

They are interesting for two reasons. On the one hand, they offer better returns than government bonds, for example. And on the other, as the demand for housing continues to drive up prices, this leads to increases in the value of property funds, which also benefit from falling interest rates.

If falling interest rates boost growth, and other measures such as tax cuts are added into the mix… 2025 has a good chance of being a decent stock market year

The stock markets performed superbly in 2024 – except for the last few days. Is that a bad omen for 2025?

2024 was an above-average year on the stock markets, but we are unlikely to match that in 2025. We won’t see the same high returns, but they should still remain positive.

So anyone who wants to get into the stock market now is too late?

Share prices have two major drivers: a company’s valuation, and its profitability. If interest rates fall faster than expected, as they did in 2024, then valuations will rise.

But it also depends on how strongly profits grow. If falling interest rates boost growth, and other measures such as tax cuts are added into the mix, then this is good for a company’s profitability and will push up the share price. 2025 has a good chance of being a decent stock market year.

How will the Swiss economy develop in the coming year?

We expect growth of 1.2%.

Other forecasters are predicting growth of up to 1.5%.

There are many question marks over exports. The strong franc plays less of a role here – demand from the most important sales markets is much more decisive when it comes to growth.

Europe must take a close look at resolving these fundamental problems, otherwise it won’t find a route back to its former strength

Europe is not looking very promising.

Europe is indeed the problem child – both economically and politically. The continent is suffering from structural problems. It’s not just about the ageing population, it’s also about setting the right framework conditions for growth.

The question of whether and how innovation is promoted is crucial. Europe is clearly lagging behind the USA in this respect. Europe must take a close look at resolving these fundamental problems, otherwise it won’t find a route back to its former strength.

Rediscovering former strength – that is also Donald Trump’s plan for the USA. Will that be good or bad for the global economy?

The signs in the USA point to growth. It’s unlikely that we will see unwelcome surprises – Trump has already announced what he intends to do: an active but pragmatic trade policy which includes an increase in tariffs. This means that we will watch how our trading partners react before deciding if we should raise tariffs further.

Read also: Outlook 2025

What does this mean for Switzerland? After all, the USA is our second-largest trading partner.

Trump has met with many businesspeople in recent days. He is always on the lookout for the next deal. That means that if you invest in the USA, and help with their reindustrialisation, then they’ll reconsider imposing punitive tariffs.

Most direct investments from Switzerland flow into the USA. Is there a threat of job migration?

Not necessarily. Those who invest in the USA often come from a strong domestic market. The jobs that are created in the USA can complement business activity in Switzerland.

The decisive factor will be what happens after Trump’s inauguration on 20^th January

What does this mean for the Swiss labour market overall?

It will remain robust. This will partly be driven by a generational change – many people are retiring so new jobs have to be filled again and again. In addition, Switzerland has a very well-trained labour force. This is one of our recipes for success: employees have the skills that the economy needs.

Do wages still have some catching up to do after the inflation of recent years?

Inflation has fallen faster than expected – as a result, purchasing power is gaining ground again. Surveys indicate a wage increase of around 1.4% in 2025, while we see inflation in Switzerland at around 0.7% in 2025.

Is a robust labour market also good for consumer sentiment?

Yes, but you shouldn’t overestimate sentiment indicators. The decisive factor will be what happens after Trump’s inauguration on 20^th January. What will he implement, and how will it be implemented? If we get clarity, it will create security and confidence, which is positive for the economy and also for consumption.