The Ibex 35 leaves the final stretch of the Christmas ‘rally’ in the hands of Lagarde and Powell

Is there room for growth in the stock markets for the remainder of 2023? This is one of the big doubts of investors. The dazzling rise in equities from the October lows has catapulted investor sentiment with an early Christmas rally included. The Ibex 35 has not been the exception in the middle of this bullish momentum with a rebound that has led the selective to achieve a greater advance during November than during the previous ten months.

After a start to December that aims to consolidate the three-year highs in which it is established, optimism among investors and analysts continues for the Spanish stock market reference. The analysis houses consulted by this newspaper are confident and predict that the positive tone will continue until the end of the year, although without ruling out a small corrective that will give air to the stock after a few last dizzying weeks.

“As long as the trend on Wall Street in Europe does not change, the increases will continue,” says IG analyst Diego Morín. Although ‘a priori’ they downplay the possible adjustments that may occur, believing that if they occur, they will be insignificant, the fuse that can light a collection of profits is in the employment data of the United States – it will be known next Friday- worse than expected, as well as in the monetary policy meetings that will be held by both the Federal Reserve (Fed) and the European Central Bank (ECB).

Without expectations on the part of the market of changes in interest rates, which remain at unprecedented levels since 2001 in both cases, up to 4.5% in the eurozone and 5.5% in the North American country, a hardening of the tone could incline investors to sell. A scenario that, despite being the least likely, cannot be completely ruled out. “Central banks will try with words to stop expectations of rate cuts, which seem excessively optimistic, especially with regard to timing,” they say from Bankinter.

The analysts of this firm consider the consensus dates to be risky, which place the first losses between March and May 2024. Instead, they choose to be cautious and consider that they will take place “at the earliest” by the end of 2024. For this reason, In their weekly analysis they describe a readjustment of expectations as “necessary” before next week’s appointments. “A small correction would be healthy,” he argues.

Behind this buying fever are the November inflation data, which has surprised the market after falling to 2.4% in the eurozone during November, marking the lowest levels of the summer of 2021, when the energy crisis began to rear its head. . On the other side of the Atlantic, the PCE deflator, the variable most followed by the Fed when drawing up its roadmap, has also fueled the advances in the stock markets after moderating to 3% in October. The difference is in the symptoms of economic slowdown, which are somewhat more pronounced in the single currency region than in the United States.

The speculation about these cuts occurs despite the message from Jerome Powell, president of the FED, last Friday, in which he called it “premature” to already talk about a withdrawal in the reference rates of money with the aforementioned PCE at those levels, al while warning that the Washington-based body was “prepared” to “further tighten the policy if it is appropriate to do so.”

In this context, the Spanish stock market benchmark faces December from 10,100 points and aims to break new resistance supported by its heavyweights, which are experiencing a favorable 2023. Two of its four leading stocks (Inditex and BBVA) have appreciated more than 50% in the annual calculation and are aiming for a record stock market price. The first in the middle of a historic year in sales and profits and the second after a year characterized by the deployment of share repurchase plans.

These are followed by other listed directors on the Ibex such as Santander, which returns to 2019 levels, once the capitalization dividend has been discounted, which acts as a deflator on the stock market value, with a higher ‘acceleration’ since the beginning of the year. to 37% and, to a lesser extent, Iberdrola, rose a modest 5.3%, from the area of ​​historical highs. With the big four smashing records, the estimates around them are of a stabilization of the share price. “We cannot think that they will continue to rise in the same proportion,” emphasizes Joaquín Robles of XTB.

With this ‘acceleration’, the Ibex 35 meets the forecasts given by analysts a year ago, cutting its twelve-month potential to below 13%, when less than a month ago it exceeded 20%, to 11,457 points. This is an unprecedented level since March 2015, so if the jump is confirmed it would reach levels prior to the first electoral repetition in Spain.