The Swiss Central Bank, a vigilant inflation hawk, raised interest rates again last week for the eighth consecutive quarter in contrast to the European Central Bank and Bank of England, which kept rates steady.
The rate hike highlights the Swiss conservative fiscal stance which makes the Switzerland exchange-traded fund (EWL) a welcome addition to any global ETF portfolio.
If you think of Switzerland as a place with high taxes and big government which stifles economic growth, think again. While only 137 miles by 216 miles in size with a population of 7.2 million, Switzerland packs a punch and is a financial and multinational powerhouse.
It has a strong currency backed by ample gold reserves, fiscal discipline, trade surplus and very little foreign debt. Outward looking, Switzerland has 40% of its GDP attributed to exports. Switzerland represents the third largest financial center in the world after New York and London. It is also home to world-beating pharmaceutical, engineering and food companies. For starters, Switzerland is home to four of the largest five firms in Europe in terms of market capitalization: UBS, Nestle, Novartis, and Roche. It also has the highest per capita income in the world.
Switzerland also enjoys a stable government, a vibrant democracy and a reputation as an asset haven in times of stress. The Swiss have had a functioning democracy for 500 years and actually has a fairly weak central government with a legislature that meets for only two weeks four times a year. What better way to play the trend that large global blue chip global companies are back in favor than with Swiss quality, value and growth through the iShares Switzerland ETF.