Rising interest rates are causing a significant financial shock for many young Swiss residents, who have never before experienced such a period of uncertainty. In the U.S., the Federal Reserve has raised its federal funds’ interest rate – the reference rate on which U.S. banks base their transactions with one another – no fewer than seven times since March 2022, taking it to a targeted range between 4.25% and 4.5%. Switzerland is no different. In response to rising inflation, the Swiss National Bank raised interest rates back into positive territory to 0.5% on September 22, 2022, further increasing it to 1% in its December meeting (for the third time this year).
Variables such as inflation, interest rates, and even globalization have been turned on their heads in these uncertain times. Investors cannot afford to take low, stable interest rates for granted any longer. Interest rates affect not only the cost of personal and corporate debt, but also company valuations. Even bond markets are vulnerable to unexpected changes in interest rates.
This is a transition period, and while it can be perplexing and unsettling, investors can find solace in the fact that central banks are firmly committed to lowering inflation. So even if your investment goal is to preserve what you have, rather than seek new ways to increase your wealth, there are steps that can, and should, be taken.
If the most lucrative opportunities are to be found during times of intense change, where should you invest now to ensure higher returns in the future? Moreover, what antidote exists to protect investors not only during bear markets, but also as a hedge against inflation?