The rally on Wall Street suffered a setback on Friday after US President Donald Trump threatened to increase tariffs on Chinese imports. The S&P 500® fell by around 2.7%, marking its largest daily decline since April. The Nasdaq Composite fell by 3.5%. Just a few days earlier, major US stock market indices had reached new all-time highs. At the start of the week, optimism returned to the market.
This illustrates how quickly market sentiment can change. It remains to be seen how the US stock market will perform in the coming months. However, even if the upward trend continues, investors must always be prepared for a setback. In this environment, a product that enables investors to participate in further price increases while limiting losses compared to a direct investment can be an appealing option. The Cushion Participation Certificate reflects this payout profile.
Capped upside, reduced downside risk
As the name suggests, the certificate is classified as participation product, meaning investors participate in both price gains (upside participation) and price losses (downside participation) of the underlying.
With the current subscription product – the Cushion Participation Certificate on the S&P 500® – the upside participation is 100%. Investors therefore benefit fully from any upward movement in the index. However, the certificate has a cap of 113%, which limits profit potential.
In return, the downside participation cushions possible losses, as price setbacks are partially cushioned. In this product, downside participation is 50%. For example, if the S&P 500® closes 10% below the fixing level, the losses for the certificate holders will be halved to 5% (cushion). This reduces the loss at maturity compared to a direct investment in the equity index.
Expectations count
The cushion participation certificate on S&P 500® is suitable for investors who expect the relevant equity index to move upwards, but do not anticipate any price fireworks in the coming months and at the same time want to reduce the downside risk. The focus is always on investor expectations.
ZKB Cushion Downside Participation Certificate on S&P 500® Index
Upside: 100%
Downside: 50%
Cap: 113%
Term: 18 months
Valor: 149 281 228
Termsheet
Indicative terms
Disclaimer
This communication is for marketing purposes. It is neither an offer nor an invitation to submit an offer, to purchase or to subscribe to securities and does not constitute investment advice. You should consult your advisors before making an investment decision. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, financial condition, development or performance of the issuer to be materially different from any future results, financial condition, development or performance expressed or implied by such statements. The present document has not been drawn up by the research department as defined in the rules of the “Directives on the Independence of Financial Research” published by the Swiss Bankers Association, hence these rules do not apply to this document. If securities are mentioned in the communication, the base prospectus, the final terms and any key information document may be obtained free of charge from Zürcher Kantonalbank, Bahnhofstrasse 9, 8001 Zurich, VRIS, and from www.zkb.ch/finanzinformationen.
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