Switzerland’s GDP growth in the second quarter of 2025 is estimated at 0.1%, which is lower than the 0.8% growth in the previous quarter.
The services sector continued to perform well, whereas the industrial sector experienced a downturn.
Swiss Economy Slows Down
The Q2 GDP figure of +0.1% shows that the Swiss economy has hit a significant slowdown after a stronger start to 2025. This sharp deceleration, driven by a contracting industrial sector, signals that the economy is more fragile than previously anticipated. We see this as a clear sign that the Swiss National Bank (SNB) will likely pause any further interest rate hikes.
This economic weakness makes the Swiss franc (CHF) vulnerable, especially against the euro and the dollar. With recent data from July 2025 showing Swiss inflation has cooled to 1.6%, well within the SNB’s target range, there is little incentive for the central bank to support the currency. We should consider using options to position for a weaker franc, such as buying EUR/CHF calls for the upcoming weeks.
The negative performance in the industrial sector also suggests headwinds for the Swiss Market Index (SMI). Recent industrial production figures have confirmed this trend, showing a month-over-month decline of 0.4% for June 2025. Therefore, buying protective put options on the SMI or on exchange-traded funds that track it could be a prudent move to hedge against a potential downturn in Swiss stocks.
Uncertain Economic Environment
This environment of slowing growth creates uncertainty, which often translates to higher market volatility. We recall how quickly the SNB has shifted policy in the past, like the sudden rate cuts seen during the European debt crisis over a decade ago in the early 2010s. This history suggests that positioning for a larger-than-expected market move, perhaps through straddle option strategies on the CHF, could be profitable.
