UBS Switzerland AG views Swiss equities as attractive following a recent market correction, citing the market’s high-quality companies and defensive sector exposure as favorable attributes during the current geopolitical uncertainty stemming from the US-Iran conflict.

The Swiss Market Index forward price-to-earnings ratio stands at around 16 times, slightly above its long-term average of 15.8 times, according to a report published Tuesday by Stefan R Meyer, CIO Equity Strategist at UBS Switzerland AG.

The firm considers valuations appealing given that corporate profitability among SMI companies has reached record highs.

The Swiss equity market offers a sustainable dividend yield above 3%, which UBS finds particularly attractive in the current zero-interest-rate environment.

SMI companies recorded flat overall earnings growth last year, as operational progress was offset by currency losses. UBS expects negative currency effects to ease significantly from the second quarter of 2026 onward.

The global economic outlook is likely to improve gradually later this year, supported by lower interest rates and fiscal policy measures across various markets, according to the report.

UBS has set a central scenario target of 14,000 for the SMI by December 2026, with the index currently at 12,421. The firm’s upside scenario projects a target of 15,000, while the downside scenario indicates 10,500.

In its upside scenario, UBS anticipates corporate profits could expand by a high-single-digit percentage in 2026 if the global economy avoids a significant downturn and Europe picks up modestly later this year. The firm expects a mid-single-digit percentage rise in SMI dividends in spring 2026 for fiscal year 2025 and in 2027.

The downside scenario considers risks from a significant global economic slowdown, further Swiss franc appreciation, and international political disputes that could weigh on the country’s above-average international exposure.

UBS identifies structural opportunities in Switzerland’s longevity sector, where companies cater to the needs of older consumers. In the energy and resources sector, several Swiss industrial firms are benefiting from transformative innovations in digitalization and the energy transition.

The firm recommends focusing on quality companies and profitability leaders, as well as selected mid-cap and cyclical stocks. UBS’s preferred investment theme is attractively valued yield stocks with dividend growth.