Navigating the New Normal: Why 5% Growth is the Reality for Stock Investors in 2026
The days of explosive stock market gains are likely behind us, at least for the near future. According to Raiffeisen investment director Matthias Geissbühler, a more modest 5% growth is a realistic expectation for 2026, a significant shift from the dramatic increases seen in recent years. But what does this mean for your investment strategy, and where should you be looking for opportunities in a changing economic landscape?
The Global Economic Headwinds
Geopolitical tensions, particularly surrounding US trade policy under President Trump, continue to cast a shadow over global economic growth. Increased spending on military and infrastructure, while potentially stimulating in the long term, won’t provide immediate relief. Even potential pre-election economic boosts from direct payments to citizens are predicted to take time to materialize. This translates to a global economy growing below its potential, with weak dynamics particularly impacting the industrial sector.
Interest Rate Stalemate & Its Impact
Both the US Federal Reserve and the Swiss National Bank are expected to maintain current interest rates, largely due to persistent inflation. This prolonged period of low interest rates, while beneficial for borrowers – particularly those with mortgages – is squeezing savers, resulting in negative real interest rates when accounting for inflation. This environment, however, does favor tangible assets like stocks, even if valuations are already high.
Stock Market Realities: Caution in the Tech Sector
While stocks remain attractive in a low-interest-rate environment, Geissbühler cautions against expecting the same level of growth seen recently. Stock valuations have outpaced corporate profit growth, suggesting limited upside. Specifically, the technology sector, particularly companies heavily invested in artificial intelligence, warrants careful consideration. The high valuations and substantial investments in data centers create a risk of disappointment.
“The valuations in the AI sector are particularly stretched. Investors need to be realistic about potential returns and understand the significant capital expenditure required to maintain growth.” – Matthias Geissbühler, Raiffeisen Switzerland Investment Director
Switzerland: A Haven for Investors?
Despite global headwinds, Geissbühler identifies the Swiss stock market as an attractive investment opportunity. The health sector, benefiting from an aging population, offers promising potential with comparatively reasonable valuations. Furthermore, a resolution to the war in Ukraine could unlock opportunities in the building materials sector, driven by infrastructure development. Investors can also anticipate record dividend payments from Swiss companies, with an average yield of 3% in the Swiss Performance Index, particularly from insurance companies.
Beyond Stocks: The Enduring Appeal of Gold
Despite a strong performance in the past year, gold remains a crucial component of a diversified portfolio. Factors like rising debt levels, a weakening US dollar, geopolitical uncertainty, and strong demand are all pointing towards further price increases. Geissbühler emphasizes the importance of holding gold as a hedge against economic instability.
Did you know? Gold has historically served as a safe-haven asset during times of economic and political turmoil, often maintaining or increasing its value when other investments decline.
The Bitcoin Question: Still Off the Table
Raiffeisen continues to exclude cryptocurrencies like Bitcoin from its asset management strategies, citing their high volatility as a primary concern. This stance is unlikely to change in the foreseeable future.
Real Estate: A Steady, if Moderate, Climb
The real estate market continues to benefit from the low-interest-rate environment and limited supply, leading to moderate increases in both asking rents and property prices. Swiss real estate funds currently offer a distribution yield of around 2%.
Navigating the Property Market
While the real estate market offers stability, it’s crucial to consider regional variations and potential risks associated with rising construction costs. Focusing on areas with strong economic fundamentals and limited new construction may offer the best long-term returns.
Frequently Asked Questions
Q: What is a realistic expectation for stock market returns in the next few years?
A: According to Raiffeisen’s analysis, a 5% growth rate is a realistic expectation for 2026, significantly lower than the gains experienced in recent years.
Q: Is it still worth investing in the technology sector?
A: While the technology sector holds long-term potential, investors should exercise caution due to high valuations and significant capital expenditure requirements, particularly in the AI space.
Q: Why does Raiffeisen not invest in Bitcoin?
A: Raiffeisen cites the high volatility of Bitcoin as the primary reason for excluding it from its asset management strategies.
Q: What role should gold play in my investment portfolio?
A: Gold should be considered a hedge against economic instability and a diversifier within a broader investment portfolio.
The economic landscape is shifting, demanding a more cautious and strategic approach to investing. While the potential for high returns may be diminishing, opportunities still exist for those who are willing to adapt and focus on long-term value. Understanding these trends and adjusting your portfolio accordingly will be key to navigating the new normal.
What are your predictions for the stock market in the coming years? Share your thoughts in the comments below!
