The Ibex 35 has registered significant gains in recent weeks. The Spanish selective reached its highest since May 2018 at 10,140 points, at which time it closed at 10,138 whole numbers. The index has performed well this year thanks to the pull of banks and star company Inditex, although there are other companies in the markets that are performing well.

Thanks to the growth that has occurred in recent weeks, Capricorn has erased everything that was lost during the pandemic. Moreover, he seems to have forgotten important milestones that occurred this year, such as the collapse of mid-sized American banks with the failure of Silicon Valley Bank and Signatura Bank. The European Central Bank’s pause in rate hikes has investors celebrating in the stock market as they predict that there will be no more rise in money prices, with many experts even daring to predict that these rates will soon begin to fall.

Banks were the companies that pushed Ibex the most to reach these highs. The main reason is that they benefit from higher rates as margins improve. BBVA is the value that is leading the rise this year, in particular rising almost 63% to €8.55. Banco Sabadell overestimated its value by 53%; and Banco Santander 43%. CaixaBank shares rose almost 20%. Although Bankinter and Unicaja are the companies that grew the least, they are still overvalued by 8.6% and 4% respectively.

In this case, the question must be asked: if they are the beneficiaries of the rate hike, then now that there is a pause and even talk about a possible reduction, they will continue their good progress. The market is clear: yes. Victor Alvargonzalez, chief strategy officer and founding partner of independent advisory firm Nextep Finance, explains that a very sharp rise in rates could trigger a recession, which would force banks to stop making loans, another way to make a profit. At the same time, he clarifies that the rate reduction will not be from today to tomorrow or sharp.

“We will not return to previous levels, even with negative rates,” Alvargonzalez says. And he adds that even if rates fall, banks will earn three times more than they did before the pandemic, at the rates that prevailed then. “Banks will be hurt if they return to their previous rates,” he notes.

The manager of Banco Santander (Santander AM) notes that the financial and energy sectors have the best prospects for 2024. In the case of Spain, it should be noted that these two sectors have received an emergency tax, which is unknown whether it will be extended in the coming years or whether its volume will increase. Despite this, Jacobo Ortega, manager of Santander AM, explains that even though this tax has been extended, “the opportunity to generate profits and reward the shareholder is very attractive.”

Banks aren’t the only ones pushing Ibex higher. Inditex did the same, accumulating growth of 60%. The textile company’s record results and forecasts mean investors continue to trust it. But Rovi outperformed Inditex, whose shares rose 62%. And we should appreciate the performance of tourism-related companies such as Aena, which grew in value by 40.7%; Amadeus – 33%; and IAG with 31%. Melia Hotels, in turn, increased in price by 25.49%. In this stock market review, we must not stop talking about Telefónica, which is still awaiting the arrival of the Saudi STC fund. The telecom company accumulated growth of 23%.

Political effect

Regarding the evolution of Ibex 35, company experts noted that there are three fundamental elements: “attractive valuations, earnings collection and share repurchase forecasts that provide an additional cushion, and the companies’ fundamentals are very solvent.” .

They also recalled that Latin America’s selective exposure is 20% and some of its countries have done a good job this year and are expected to continue that way given the progress of their monetary policies that are already on track to apply reduction in rates. A statement with which the Director of Financial Strategy at Nextep Finance agrees. “Ibex is a company of Spanish multinationals that operate in South America, the rest of the Americas and Europe, so the decisions of the central banks influence more than what the government does,” he assures, although he notes that “everyone is under one order because if the situation is very hostile for companies, it will have an impact.”