A historic event is taking place in Switzerland. The Switzerland stock market index (SMI) is breaking out to all-time highs. More importantly, the Switzerland stock market index (SMI) breaks above of its 2 decade canvas (chart pattern). This is a hugely bullish development. It is a no-brainer that our Switzerland stock market forecast for 2020 and beyond is bullish! It may qualify in our top 3 investing opportunities for next year. Interestingly, this also comes after a bullish Swedish stocks forecast, so something very interesting is happening in Europe!
Swiss Stock Market Breakout
Looking at the state of the Swiss stock market, in trying to understand what our Switzerland stock market forecast for 2020 and beyond may look like, the one thing that stands out is the giant breakout on its chart.
Make no mistake a 2-decade long pattern that gets broken to the upside is a very important ‘event’.
Interestingly, as a general point, this ‘event’ comes with no excitement.
Correct, this is a ‘silent bull market’. And we love them, as they are the most powerful imaginable.
It is the timing of any entry in the Swiss stock market that matters. An entry at the start of a silent bull market is great.
As defined in our investing tips for long term success
‘Timing is not the most important thing, it is the only thing.’ This implies that timing an entry point as well as exit point is by far the most important thing for an investor to do well. ‘Timing is the only thing‘ means that it is more important than reading news, analyzing fundamentals, following gurus, and so on. Excellent charting skills are a prerequisite to apply this principle!
Let’s look at some fundamentals first, and then conclude with a Swiss stock market forecast for 2020.
Switzerland Stock Market Forecast: Fundamentals
We do not want to go too deep into fundamental analysis.
However it pays off to do some top line fundamental checks for every stock market or company as part of any longer term forecast.
First, the consumer price index in the last 10 years. The CPI shows a dip in the first months of 2016. Since prices as tracked by the CPI index have been rising. This certainly helps companies in the SMI Index as there are some heavy weights in the consumer good sector (think of Nestle with a market cap of $220B).
Second, interest rates are below zero for 3 – 4 straight years. This certainly is concerning. For consumers this is killing their savings. For the economy apparently it may help somehow. The stock market index is getting some help as well.
We do not want to elaborate on the economic long term impact of negative rates. We have our opinion on this, but the point in this article is about the effect on the Swiss stock market. Clearly, negative rates somehow help for stocks to go up. So there is a positive impact on our Switzerland stock market forecast.
Third, annual GDP growth is mostly above 2% in the last 10 years. Sometimes, it falls right below 2% as seen on the chart below.
Comparing this with other countries in the same region, think Germany or France or Belgium, this chart looks more constructive!
Switzerland Stock Market Forecast for 2020: Awesome Chart
What does all of the above fundamental data say about our Swiss stock market forecast for 2020 and beyond?
Well, the fundamental data underpin a steadily growing economy. They data (courtesy of TradingEconomics) do make sense. Below zero interest rates stimulate consumer spending which in turn is supportive of rising consumer prices. This, in turn, helps GDP. The fundamental data do make sense, and they are supportive of higher stock prices.
We do not pursue any thinking about the impact of negative interest rates. That’s beyond our Swiss stock market forecast.
We only want to find out that fundamentals line up with the chart, as part of our forecast(s).
Chart-wise, it is awesome, truly!
The Swiss stock market breaks out, convincingly. Note that this is a breakout above a pattern that is in the making for 13 years.
More importantly, the Swiss stock market breaks out of its 2-decade old ‘canvas’ on its chart.
This really is major news!
What’s interesting is that this goes unnoticed. Searching for the Swiss stock market does not reveal any news about this giant breakout. Some may argue that this is ‘technical’. We disagree. The charts ARE the market. So any market related report must contain a decent analysis of the chart that the article talks about. How can anyone bring market news without a basic analysis of the chart which incorporates all the market related data?
Our Swiss stock market forecast is BULLISH for 2020 and beyond. A long term secular bullish trend may have started in May of 2019. All we need is a confirmation of this breakout. We want to see 3 to 5 monthly closes above the 9600 level.