The Ibex 35 can reach an unprecedented level since 2018. The main reference index of the Spanish stock market has the potential to end the year at 10,649 points, which would mean a rebound of 20%, according to GVC Gaesco. The figure even exceeds the market consensus, which places it at the level of 10,150 points for this 2023, after starting the year wanting to come back. After closing this Wednesday at 8,933 points, this index accumulates a rise of more than 8%, so that in less than three weeks it has already advanced at least a third of what was forecast by the aforementioned financial group.
The delay in returning to pre-Covid levels is one of the factors behind this possible rebound, according to the company’s Director of Analysis and Strategy, Víctor Peiró. GVC Gaesco estimates that the profits of Ibex 35 companies will be 113% higher than those recorded in 2019, the last full year without Covid. The percentage remains above the average of the Euro Stoxx companies, which already exceeds the profits of three years ago by 10%, while those of the S&P500 already register 24% more profit.
“The stock indices have not reflected this evolution,” says Peiró. The expert focuses on the behavior of earnings per share, which will fall by up to 11% in the case of the 35 firms on the Ibex, compared to the rise of 18% recorded in 2022. The decline also contrasts with the rise in the 5% planned for all the firms listed on the S&P500 and 3% for the Euro Stoxx.
The selective has been one of the least punished in the entire Old Continent during 2022, with a decline of 5.5%. Now he faces the year with an upward trend, twelve months that Peiró foresees will be those of the “return to calm” in equities after the ‘black swans’ of the pandemic and the Russian invasion of Ukraine. The small print is that the stock markets will register “ups and downs”, before which he recommends applying active management.
“The bullish reaction that we are seeing since the beginning of the year is within the positive behavior that we expect, but as happens in many years, it may be too concentrated at various moments in time,” they point out. Under this premise, they overweight sectors such as infrastructure, health or clean energy. Banking also stands out, an activity with great representation on the Ibex, where the six financial institutions account for around a third.
Controlled air conditioning in 2024
GVC’s investment strategy for 2023 contemplates a scenario of high inflation, although with somewhat more moderate rates, especially of the core. Despite this, I do not believe that the price increase will be controlled until mid-2024 in the euro area and we will have to wait until 2025 for it to fall to the target of the European Central Bank (ECB), in line with the forecasts of the organization led by Cristina Lagarde.
Thus, they expect a rise in interest rates of another 75 basis points for this year, up to 3.25%, to begin to reduce them during the following year. On the other side of the Atlantic, GVC Gaesco is confident that the Federal Reserve will place them at 5%, compared to the current 4.5%, before lowering them again to 3.5%. “It is more normal to have interest rates at 2% than at 0%,” Peiró remarked.