The statistics projected a day of stock market bleeding, but what pointed to a disaster, finally ended in a modest setback. The Ibex 35 has passed the electoral hangover without major shocks after cutting a meager 0.29%, which barely feels or suffers from the political blockade that could lead to a repeat election. The block on the right (PP and Vox) does not have enough to govern and the left depends, among others, on Carles Puigdemont’s party (Junts per Catalunya) to keep Pedro Sánchez in La Moncloa.
The Spanish stock market benchmark suffers less than expected despite the worst case scenario: apparent ungovernability. “The Ibex’s rise of more than 400 points since May seemed to reflect a victory for the more pro-business right, however, Sunday’s result could be classified as the least economically desirable,” says the head of Admirals Spain, Franco Macchiavelli. Analysts are already warning that one of the main short-term consequences of negotiating pacts and alliances will be stagnation in obtaining European funds and a Spanish presidency of the European Union with little impact.
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80% of the securities listed on the main world indices used in the quarterly accounts. To these days of vertigo for the business fabric, we must add the intervention of the Federal Reserve, which may resume rate hikes after the halt on the road in June, and the European Central Bank (ECB), which is expected to raise reference rates by 25 basis points, up to 4.25%, while in the United States they are at 5.25%.
The expectation that the end of the cycle of interest rate increases is drawing near, channels investors’ attention towards other variables with a greater impact on the stock markets and relegates the result of the elections to the background. Among them, the publication of private sector activity in the euro area stands out, whose deterioration accentuated in July for the second consecutive month and suggests an economic slowdown, to 48.9 points, according to the PMI index. Without forgetting that in Germany, the manufacturing PMI has fallen from 41 points to 38.8 points, its lowest level in 38 months, which coincides with the worst moments of the pandemic.
“This means a clear recession,” says Natalia Aguirre, an analyst at Renta 4, who attributes the mixed tone of the Old Continent’s stock markets yesterday to the fact that they perceive the economic slowdown as a sign that the restrictive monetary policy is reaching its ceiling. In this context, the experts consulted by this means showed that days of high volatility are coming for the market, which will have a greater impact on the index than the elections themselves.
In addition to those mentioned, the intervention of the central banks will be followed by the advance of the CPI data of some European economies, such as Spain. The circumstance occurs that although the selective has led the falls in the Old Continent, the reaction has been the same as that experienced on March 9, 2008, when José Luis Rodríguez Zapatero revalidated a second legislature. From a sample that includes the last eleven general elections, including this Sunday’s, on only two occasions has the Ibex 35 sealed the Monday after the vote count with the best balance and both have taken place after the 2019 vote count.
Specifically, in May of that year, when there was a possibility that Pedro Sánchez would form a government with Ciudadanos, the index accelerated by 0.12%, being the only time it has risen after the appointment with the polls, while it practically closed at the table (-0.06%) with the return to the polling stations in November of that same year. Electoral repetition has never sat well with investors. Without including the impact of Brexit on the Ibex, which pushed it to register a drop of 12.35%, the biggest drop in its history, in the period between the holding of the December 2015 elections and their repetition, in June 2016, this reference dropped more than 11%. On the other hand, in 2019 it hardly moved, with a negative variation of 1.8%.
From Admirals they defend that two elections were held in Spain four years ago and “the economy grew without significant impact”, so they do not expect a great repercussion derived from this variable. “The focus is on the European block and the monetary policy by the ECB to assess the impact on the main European countries,” they specify. In this regard, the Swiss manager Julius Baer maintains a neutral position on equities given earnings expectations and a “less favourable” macroeconomic context. For the moment, the ‘Bloomberg’ consensus maintains the twelve-month potential of the Ibex slightly above 11,100 points, which would mean settling at 2015 highs.
