If you thought your portfolio had a bad year in 2022, wait until you hear about the Swiss National Bank. 🙈
Based on its preliminary figures, it’s anticipating a 132 billion Swiss franc loss. That represents the largest loss in the central bank’s 116-year history and is about 18% of the country’s gross domestic product (GDP). This compares to the bank’s 26 billion franc profit in 2021.
What it ultimately means is that its usual payouts to the Swiss government, member statements, and shareholders will not be taking place. ❌
So why were their results so bad?
Typically the export-heavy country looks to keep its currency’s value down. But demand for the Swiss franc rose as investors viewed it as a safe haven amid the rest of the European continent’s volatility. Nominal interest rates in the country are only 1%, but its inflation rate of 3% is far below the euro zone’s and much of the globe’s.
As a result of its domestic currency’s strength, the central bank lost 131 billion francs on its foreign currency positions and 1 billion on its Swiss franc positions. Weak performance in the stock and bond market also weighed on its portfolio. The sole bright spot was its gold holdings, which saw a 400 million franc gain. 🪙
It just goes to show, that not even central banks, in all their wisdom, have it all figured out. So the next time you feel bad about screwing up a trade, at least you can say it didn’t cost you 18% of your country’s GDP. 🤷