Normally, the annual adjustment to the composition of the Swiss Market Index (SMI)—the benchmark index of the Swiss equity market, comprising Switzerland’s 20 largest companies—attracts little attention. This year, however, is different. On 21 September, two well-known companies, telecommunications provider Swisscom and logistics group Kühne+Nagel, will be removed from the SMI. Based on market capitalization and liquidity, they no longer rank among Switzerland’s 20 largest listed companies. They will be replaced by two health care companies: Galderma, a global leader in skincare and aesthetic products, and Sandoz, a specialist in generics and biosimilar medicines.
Swiss benchmark index is heavily weighted toward health care
The change in composition will also affect the sector weightings of the SMI. The health care sector’s weighting will rise from around 36% currently to approximately 40%. So far, this overweight has not detracted from performance: the SMI has gained around 8.5% since the beginning of the year, while its two health care heavyweights, Roche and Novartis, have risen by around 13% and 15%, respectively. Nevertheless, the health care sector’s dominance makes the SMI more exposed to sector-specific volatility and risks than a broadly diversified portfolio.
In our view, investors should not focus solely on the SMI but diversify their equity investments more broadly. One option is to invest globally, as we argued in our March 2026 CIO Essentials, because global markets are significantly more diversified than the Swiss market. The global equity market also has a greater allocation to the IT sector than the Swiss equity market. Historically, IT has been a major driver of global equity-market performance and is likely to remain central to the economy in the age of artificial intelligence.
Diversify into mid-sized listed companies
In addition, investors may wish to consider exposure to Swiss equities beyond the SMI. As of mid-September, the index of mid-cap Swiss companies, the SMI Mid, is significantly less concentrated in health care stocks. Adding mid-caps may therefore improve diversification. Mid- and small -cap Swiss companies are also supported by other factors. Their valuations remain higher than those of SMI companies, but the gap has narrowed significantly, which appears attractive in light of their earnings-growth outlook. The SMI Mid may also benefit more from an economic recovery in the coming quarters, given its greater exposure to economically sensitive industrial companies. Despite geopolitical risks in the Middle East, the outlook for an economic recovery remains constructive. This is reflected in the improving purchasing managers’ indices in the US and Europe, which are closely watched economic indicators of economic activity in financial markets.
