A new generation of computers is conquering the market: the quantum computer. In combination with Artificial Intelligence, it opens up entirely new possibilities.

There are some things you don't need to understand in detail, as long as they work. Quantum computers, for example, are among them. Unlike conventional computers that calculate with classical bits, they use quantum bits, or "qubits." By utilizing quantum physics, these qubits can not only take on the state 0 "or" 1, as is the case with classical bits, but they can also occupy both states simultaneously – meaning 0 "and" 1 at the same time. With this ability, quantum computers come significantly closer to the complexity of our world than a normal computer ever could.

From quantum computing and AI to quantum AI

Quantum computing is required, for instance, when medical research needs to investigate the interactions of molecules to develop new medicines. This could significantly accelerate drug development and potentially make clinical trials on animals and humans unnecessary. Furthermore, observers say that Artificial Intelligence will only become truly intelligent through quantum computers. The so-called "Quantum AI" is expected to overshadow all existing possibilities. By combining the two key technologies of quantum computing and AI, "Quantum Machine Learning" becomes possible, which mimics the functioning of our brain. According to experts, AI without quantum computing is comparable to "driving a Porsche with a ton-heavy trailer"; AI with quantum computing, on the other hand, is like a "Porsche with warp drive," moving at faster-than-light speeds. While such comparisons may seem somewhat blunt, they do illustrate the dimension of this technological leap.

The disruptive power of quantum computing

Experts attribute a disruptive power to quantum computing – meaning that the technology will completely cast aside the existing and shake up markets. The standard "bit computer" could soon belong to the past, while the quantum computer becomes the standard. Although there are currently no affordable, "off-the-shelf" quantum computers available for everyone to buy, it is likely only a matter of time. Because of this, companies that are currently considered technological leaders in computing could face difficulties in a short period if they pay too little attention to quantum computing. New companies will emerge and take over the market. This is disruption in the truest sense of the word.

Quantum computing for your portfolio

Investors can already integrate the theme of quantum computing into their portfolios today. BNP Paribas offers leveraged products on specialized "quantum computing companies" such as Rigetti Computing, IonQ, and D-Wave Quantum. In addition, giants such as IBM, Alphabet, and Microsoft are active in the "quantum business," with BNP Paribas offering products on these companies as well.

For any questions regarding our products, please contact us via phone at +41 58 212 68 50 or via email at markets.ch@bnpparibas.com. Further information can be found on our website at www.bnpparibasmarkets.ch/en. Please be advised that calls will be recorded for quality assurance purposes.

This article constitutes marketing material pursuant to Article 68 of the Swiss Federal Act on Financial Services (FinSA) and is intended for informational purposes only. The information does not constitute an investment recommendation or advice and does not contain an offer, nor an invitation to submit an offer. Reproducing any part of this article in any form without our prior written permission is prohibited, except for the creation of a single copy or excerpt solely for personal, non‑commercial use.

Rising interest rates on one hand, rising corporate earnings on the other – in the equity market, opportunity and risk currently lie close together. However, because market breadth is declining, investors should now exercise caution.

The decision is sensible, yet it came as a surprise: the US Federal Reserve has raised key interest rates. In mid-September, rates rose by 0.25 percentage points to a range of now 3.75 to 4 percent. The hike is justified because inflation in the US has risen significantly for some time. In August, it stood at 3.6 percent, matching the previous month. Critics warn of inflation becoming entrenched, which could have significant negative impacts on consumption in the medium term. Nevertheless, the hike is highly controversial, especially in politics. Leading the charge, US President Donald Trump reacted aggressively and suspects a conspiracy – understandable, as his popularity among Americans is clearly waning. This presents a major problem, as the midterm elections are approaching in November. Although voting is not directly for the office of the US President, but rather for the composition of the Senate and the House of Representatives, the midterms are regarded as an important litmus test for Trump's policies. Rising interest rates, however sensible they may be, do not fare well in such an environment.

That is one side of the story. On the other hand, despite growing uncertainties for the equity market, many companies in the US are currently convincing with strong numbers and outlooks. The second-quarter earnings season in the US was one of the best in recent decades. Earnings in the S&P 500 are around 50 percent above the level of the second quarter of 2025. Although this strong increase is partly distorted by booking effects in the quarterly earnings of Alphabet and Amazon, even after adjusting for this influence, the earnings growth in the second quarter still stands at approximately 30 percent.

The "defenders" are becoming fewer

It is therefore obvious that US companies are doing well, which is also reflected in share prices. Benchmark indices such as the Dow Jones and the S&P 500 have reached record levels during the year, which they have been bravely defending for several months now. However, a development has recently emerged that should make investors more cautious: the market breadth of the "defenders" of these record levels is declining. The number of S&P stocks trading above their 200-day moving average has been declining significantly for some time. By mid-September, only about half of the S&P securities were trading above this level (see graph). By comparison, in July and August, over 70 percent of stocks were trading above their 200-day moving average.

The proportion of stocks participating in this "battle to defend records" is dwindling. For investors engaged in technical market analysis, this at least sets off alarm bells. A declining market breadth may signal the beginning of a correction in the overall market, which in this case would be the S&P 500.

Stock picking and portfolio hedging

For investors, it may therefore make sense now to focus more on stock picking rather than on the broad market. This also applies to the Swiss equity market, which in mid-September also showed declining market breadth, for instance in the Swiss Market Index (SMI). This weakness may not be permanent and could reverse, yet investors should react to it. In addition to stock picking, hedging existing portfolio positions is also conceivable.

To hedge your portfolio, we offer Mini-Shorts and Knock-Out Warrant Puts on the S&P 500 and the SMI, among other products.

For any questions regarding our products, please contact us via phone at +41 58 212 68 50 or via email at markets.ch@bnpparibas.com. Further information can be found on our website at www.bnpparibasmarkets.ch/en. Please be advised that calls will be recorded for quality assurance purposes.

This article constitutes marketing material pursuant to Article 68 of the Swiss Federal Act on Financial Services (FinSA) and is intended for informational purposes only. The information does not constitute an investment recommendation or advice and does not contain an offer, nor an invitation to submit an offer. Reproducing any part of this article in any form without our prior written permission is prohibited, except for the creation of a single copy or excerpt solely for personal, non‑commercial use.

Rates up, rates down or will they remain unchanged – could investors enhance income without having to make a single big call on what the Federal Reserve does next? A new investment idea from Julius Baer offers income potential across different rate scenarios.

A new Fed, but which direction for rates?

The US economy continues to demonstrate resilience, while signs of a softer labour market suggest that wage-driven inflationary pressures have peaked. Although the Federal Reserve is not expected to embark on a rate-hike cycle, visibility remains low. With the new Fed chair displaying a hawkish bias towards inflation while largely refraining from forward guidance, changing expectations could keep interest-rate markets moving. For income-seeking investors, committing to a single interest-rate scenario may therefore be increasingly challenging.

Why choose just one rate scenario?

A floored floating-rate approach offers an interesting alternative. If short-term rates rise, investors can participate in the higher-rate environment up to a predefined cap, reducing interest-rate sensitivity compared with conventional fixed-income securities. Should economic conditions deteriorate and prompt the Fed to cut rates, an embedded coupon floor provides protection by preserving a minimum level of income. This creates the potential for enhanced income across different rate scenarios – without requiring investors to make a single big call on where rates are heading.

Balancing flexibility and risks

The combination of participation in higher short-term rates and protection through a coupon floor can offer a differentiated risk/return profile and a potentially smoother approach to income over time. Such flexibility does not remove risk entirely: participation in rising rates is limited by the cap, while investors remain exposed to issuer credit risk. However, for investors seeking an alternative to traditional money market investments, this balance of income potential and resilience may be worth exploring. With the Fed entering a new chapter, could flexibility help keep your income strategy fit for what comes next?

Find out more about this investment idea.

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