Since 2016, the Ibex 35 has closed negative in every even year so far. Until now. The Ibex 35 is expected to close in 2024 the curse even years. And, for the first time since 2010, it is close to 12,000 points. The increase in the Spanish index in 2024 even exceeds 18% and in 2024 it directly competes with heavy goods vehicles on Wall Street for being one of the most optimistic of the year. And, for the experts, as if it were the climb to San Juan de Gaztelugatxe, The Ibex 35 has not yet reached the top of the course and still has steps to climb in the coming months.
At the start of 2024, forecasts did not imagine the level of optimism perceived on Spanish stocks. At the end of 2023, the consensus of analysts which includes Bloomberg I saw the Ibex 35 end the current year at 11,580 points, which, at the levels of that date (at 10,100 points) left the national selective with a potential increase of almost 15%. Less than two weeks ago, the Ibex 35 ended up definitively exceeding this level expected for the end of the year.
The truth is that, after recent years in which upheavals have been practically constant, 2024 will be characterized by being (for the moment) an exercise of a few scares. The economy demonstrated its strength, as inflation gradually doubled, and only at the beginning of August, when the drums of recession sounded again in the United States, the stock markets expressed fears that all can collapse again. In just one week, the Ibex 35 lost more than 7% of its value, marking its longest declining streak since April.even if its decline during these five sessions was the strongest of the year. But the fears remained the same and in September the US Federal Reserve (Fed) joined the European Central Bank (ECB) and lowered interest rates for the first time in over four years (it carried out a giant reduction of 50 points in fundamentals), start a new, more accommodating monetary cycle. Forecasts indicate that this new monetary policy will eventually bring the deposit facility rate below 2% in Europe and to 3% at the Fed’s reference rate in September 2025.
With this new environment, the stock markets are resuming the upward trend and the Ibex 35 even rebounds by a little more than 15% compared to these August lows. And more than 50% of the experts consulted by elEconomista.es In a survey carried out, it estimates that the Ibex 35 will end the year above current levels. In other words, the Spanish index will continue to increase even more in the coming months. Of the fifteen companies that participated in this survey, only 13% believe that the main selective of the Spanish stock exchange will end 2024 at levels lower than current levels, compared to 33% who affirm that this will be the level at which it will put the finishing touches to exercise.
Bankinter defends this positive outlook for the Spanish stock market, because “the stock markets will benefit from an environment of economic growth and falling interest rates” and with them the ibex could continue in the rally upward trend which made it the most bullish index on the continent. In its latest report for the fourth quarter of 2024, The banking entity estimates that the Spanish index will increase by 12% on the stock market by the end of 2025above the 10.7% expected for the European stock market at a general level.
At ATL Capital, Ignacio Cantos expects moderate increases, because “profits in sectors like banking and in some companies with significant weight like Inditex and Iberdrola will be solid and this will help the index as a whole.” Furthermore, from Banco Big they point in the same direction and They see the behavior of certain companies as the main catalyst for increases in the coming months.: “The good situation of the banks, utilities and companies like Inditex or Aena can push the index to higher levels,” they say.
In Buy & Hold they list three reasons why the Spanish index will continue to rise in the coming months, according to them. On the one hand, due to the index’s own valuation: “Despite the accumulated increase, The Ibex 35 still trades at very low earnings multiples and with one of the highest average dividends of Western indices”, they point out. On the other hand, due to the composition of the index itself: “It has many traditional values, which benefit in a lower rate environment, such as electricity companies, Telefónica, real estate agencies, etc”; and, finally, by itself momentumsince this scenario of lower rates as well as the “good macroeconomic news” will continue to support increases in the months to come.
The most careful
It nevertheless seems relevant to cite one of the greatest lessons of Oracle of OmahaWarren Buffet, “Be afraid when others are greedy and be greedy when others are afraid.” This is the opinion of the professor of finance at the Francisco Marroquín University and market analyst, Gustavo Martínez, who believes that “even if there is the catalyst for falling interest ratesthis phenomenon is already largely integrated by the market and should be neutralized by greater risk aversion after the American elections on Tuesday, November 5.
The director of Divacons, Pablo García, understands that, on the other hand, the rate cuts will affect the banks and therefore the index, since “the banks, which supported the recent rallymay have marked cycle highs as further rate cuts expected will affect intermediation margins and ROE. Inditex, Iberdrola and Telefónica could maintain a good tone, but they will probably not reach new highs”, ending this positive cycle for the Spanish stock market.
SingularBank’s Director of Equity Analysis, Nicolas López, shares a more cautious perspective on the evolution of our country’s stock market. The expert explains that in recent weeks the Ibex 35 “has been favored by the sharp drop in bond yields, which has favored a rotation towards sectors such as utilities, infrastructure or telecommunications which have a high weight in the index”, but “Although in the medium term we still find these sectors attractive, in the short term we think there could be some rebound in IRRs which would limit the increase after the recent strong increases“.
In Tradition, analyst Rubén Ruiz predicts that “in the coming weeks we will witness a market rebound driven by the drop in interest rates”, while anticipating “a sale stocks in mid-Octobermainly due to recipes by managers, after the positive results that the stock markets have had so far.” Added to this is “the proximity of the elections in the United States, which adds a layer of uncertainty that could lead investors adopt more cautious positions“.
Regarding this future electoral meeting between Kamala Harris and Donald Trump, Aurigas expert Ignacio Zarza explains that “waiting for the result of the presidential elections” can lead to “a halt in economic activity in the United States”, which , with the weakness shown by the economies of Germany and China “may mean a deterioration of macroeconomic data that affects the price of the Spanish index”, despite the fact that it “accumulates a notable revaluation during the ‘year”.
Portfolio turnover
As with rate hikes, some companies will benefit from this new cycle and this will cause some turnover in investors’ portfolios. And while it may be one of the hardest hit by falling interest rates, The experts consulted continue to have confidence in the actions of the banks and that’s why they recommend keeping it in your wallets. They also generally target those sectors like utilities either real estatewho will benefit from reduced rates. All this, while being aware of the evolution of the Chinese economy and how it can affect different sectors.
From Tressis, Víctor Álvarez, director of variable income of the entity, explains what the ideal rotation of his portfolio would be: “We would include Defense (Indra), automotive components (CIE), construction (ACS), infrastructure ( Aena or Ferrocial) and leisure (Amadeus). We would be cautious with highly indebted companies and that they need much lower rates to benefit from them. “We would also be selective with the financial sector, insurers should do better than banks, given their lower exposure to interest rates.”
By sector, for the Bankinter analysis and markets team, their favorites remain technology, semiconductors and cybersecurity, industries which have seen the strongest stock market increases throughout 2024. They also add that “ bond proxies (UtilitiesReal Estate, Infrastructure) will benefit from this environment. We are withdrawing Defense due to the likely holding of a peace conference on Ukraine in Novemberwhich, in our opinion, would absolutely not lead to an immediate conclusion to the conflict, but it would have the advantage of making it less relevant to Ukraine and Europe winning the US elections. “And Luxury for China’s continued weakness.”
Nicolás López, director of equity analysis at Singular Bank, says that in his case portfolio rotation would focus more on duration and less on scenario. SO, would focus your portfolio on the medium term and argues that “the objective of the rotation would be to have more exposure to sectors that benefit from a scenario of moderate growth of the economy, and lower interest rates and inflation. In this context, we would increase the weighting of healthcare sector securities.” and infrastructure in general, with a lower weighting on purely cyclical securities or those heavily exposed to China initially we would be exposed to a cyclical recovery through small caps, which is a segment that lags far behind cyclical sectors. in general.
