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Switzerland: On the top of historical financial returns ranking
The report “Switzerland: A Financial Market History”, published today by the Credit Suisse Research Institute in partnership with leading experts from London Business School and Cambridge Judge Business School, investigates the sources of Switzerland’s economic success, pointing out the country’s long-term stability and its low inflation rate as key success factors. The report, based on the dataset of the Credit Suisse Global Investment Returns Yearbook, presents the Swiss financial market from a broad economic perspective and compares its performance with 22 selected markets. The analysis spans 1900 to 2016, covering stocks, bonds and Treasury bills, as well as the developments of the nations’ inflation rates and currencies.
The report by Elroy Dimson, Paul Marsh and Mike Staunton underlines the long-term standing of Switzerland as a strong and stable market. Despite being a small country with just 0.1% of the world’s population and less than 0.01% of its land mass, Switzerland is the seventh-largest and one of the world’s least volatile equity markets and accounts for nearly 3% of total global equity value.
Urs Rohner, Chairman of the Credit Suisse Research Institute and Chairman of the Board of Directors of Credit Suisse Group, commented: “Switzerland’s internationally leading position merits special attention from investors and underscores the need for key stakeholders to continue to engage, support and sustain the differentiating strengths of the Swiss economy and its financial center, which have enabled such an impressive track record.”
A video commentary by Urs Rohner, Chairman of the Credit Suisse Research Institute and Chairman of the Board of Directors of Credit Suisse Group, is available at:
Stability has led to above-average returns in Switzerland
According to the report, Switzerland was the fourth least volatile equity market and second least volatile bond market over the 117-year evaluation period. This stability has been reflected in the financial results. Over the past 117 years, equities achieved annualized real returns of 4.4%, which is above the European average. Meanwhile, the bond market proved to be one of the best performing in the world, with an annualized real return of 2.3%. Basically, this means that an initial investment of CHF 1 made over a century ago, with dividends reinvested, would have grown in purchasing power by 159 times for equities, and 15.1 times for bonds. The Swiss franc strengthened against the US dollar by 0.71% per year – in fact, every other currency in the 22 assessed countries depreciated against the Swiss franc over our 117-year evaluation period.
Richard Kersley, Head of Global Research Product at Credit Suisse, commented: “The report ‘Switzerland – A Financial Market History’ provides a unique historical lens with which to view a rapidly changing investment discussion. The key findings of the report confirm that Switzerland punches well above its weight financially and wins several gold medals in the global financial stakes.”
Low inflation: the major success factor
The research report confirms that on top of the long-term stability and low volatility, Switzerland benefited from the world’s lowest 117-year inflation rate of 2.2% per annum. The runners-up – the US and the Netherlands – recorded a rate of 2.9%. This apparently small difference means that while in Switzerland prices rose 12-fold, Dutch and American consumers had to fork out 27 or 28 times as much, respectively. The figures are much higher for Switzerland’s neighboring countries. France, Germany, Italy and Austria all experienced high inflation periods.
Burkhard Varnholt, Chief Investment Officer Switzerland at Credit Suisse, added: “Price stability is the best foundation for economic and political stability. For the patient investor, it compounds into powerful total returns. This has created a unique environment, which has given the Swiss financial center a global edge.”
The reports “Switzerland: A Financial Market History” and “Credit Suisse Global Investment Returns Yearbook 2017” are available online at: https://www.credit-suisse.com/ch/en/about-us/research/research-institute/publications.html
About the report “Switzerland: A Financial Market History”
“Switzerland: A Financial Market History” is a long-run study covering 117 years of investment returns since 1900 in all the main asset categories. The report has been produced in conjunction with Professor Elroy Dimson of Cambridge Judge Business School, Professor Paul Marsh and Dr. Mike Staunton of London Business School, recognized as the leading authorities on the analysis of the long-run performance and trends of global asset classes.
The report is based on the dataset of the Credit Suisse Global Investment Returns Yearbook and covers the following countries: two North American nations (Canada and the US), ten Eurozone states (Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal, and Spain), six European markets that are outside the euro area (Denmark, Norway, Russia, Sweden, Switzerland and the UK), four Asia-Pacific countries (Australia, China, Japan and New Zealand) and one African market (South Africa).
About the Credit Suisse Research Institute
The Credit Suisse Research Institute is Credit Suisse's in-house think tank. The Institute was established in the aftermath of the 2008 financial crisis with the objective of studying long-term economic developments, which have – or promise to have – a global impact within and beyond the financial services. Further information about the Credit Suisse Research Institute can be found at www.credit-suisse.com/researchinstitute.