The Ibex 35 is approaching historic highs despite economic uncertainty.

BarcelonaRecent months have seen a bullish rally for the European stock market, and in the case of the Spanish stock market, the Ibex 35—the main Spanish index that groups the 35 most powerful companies—has been the subject of several headlines suggesting that the index was approaching its all-time high. This Friday, the index closed a weak week: it closed again below the 15,000 points it had managed to recover in August, remaining at 14,850.9. However, the index has accumulated growth of more than 30% in the last year (from August to August), and a 112% increase in the last five years, following the outbreak of the COVID-19 pandemic.

In a rather hostile international context for the economy, or at least one full of uncertainties – largely driven by the trade and tariff war of US President Donald Trump, as well as the instability caused by the wars in Ukraine and Gaza – the Ibex 35 is not only holding up, but is approaching the 5. level of 2007, just before the great financial crisis of 2008. In the last six months alone, the index has grown by 11.9%. What is the reason for the rise and how far can it go?

Xavier Brun, professor of the master's degree in financial markets at the Barcelona School of Management (UPF), points to a paradigm shift: "In 2024, we were coming off a very good period in the most interesting US markets, so American investors began to look towards Europe to invest," Brun points out. It was a decade in which the US was doing much better than Europe, mainly due to the already The Magnificent Seven. "The same didn't happen in Europe because companies here are very cyclical, there are many more banks than in the US, and interest rates had been at 0% for years," explains the professor.

In December 2024, however, "the paradigm began to change: investors began to look elsewhere, and Europe began to shine, especially with the banking sector." Thus, "this money from international investors that was previously in the US began to invest in banks here, because it was sensed that the ECB would not lower rates again quickly," says Brun, and, in addition, the American market was starting to get very expensive.

Banks lead the euphoria

Brun also highlights the characteristics of the index itself: "The Ibex has exported more than 30% of its gains in the last year, two-thirds of which come from the banking sector alone," he points out. In fact, the banking sector, in this case led by CaixaBank, BBVA, and Santander, has had record-breaking years since the European Central Bank (ECB) raised interest rates—the price of money—in July 2022. for the first time since 2011.

The executive director of EFPA (the association of financial analysts), Josep Soler, points out in statements to ARA that "one of the peculiarities of the Ibex is that it is recovering levels from 18 years ago because until now the banks were completely stagnant, and other important companies in the selective have not pulled enough, the case of energy companies, for example, where only Iberdrola has done well." In fact, the banks have led the stock market euphoria: "Santander, BBVA, CaixaBank and Sabadell have accumulated revaluations of around 80%," notes Soler.

Both Brun and Soler point to five main companies to take into account when analyzing the Ibex: CaixaBank, Santander, BBVA, Inditex and Iberdrola. These alone account for more than 50% of the Ibex 35's market capitalization, so, according to Soler, "the index should be relativized as an indicator linked to the Spanish economy because it is unbalanced and not representative of the country."

More growth?

Although it has been on the verge of doing so, for the moment the index has not yet surpassed the almost 16,000 points that represent its all-time high, and, according to experts, its growth margin is beginning to run out. On the Ibex, with the exception of Inditex, all other stocks and primarily the banking sector have had "brutal returns, many of more than 50-60%," and economists see this as unlikely to be repeated. According to Brun, "it is difficult for banks to return to having such high returns as they have been until now because profit expectations are not that good, since up until now they have had brutal results due to the rise in interest rates. However, we have to see what the ECB will do, so an improvement in the banking sector is expected, but not as great as until now," he asserts.

For his part, Josep Soler points out that "there have already been four rate cuts this year, and yet bank profits continue to rise." He also explains that "a lot of money has gone into investment funds, and this is linked to banks, so there seems to be some room for it to rise a little, but we also have to keep in mind that any global news can move the markets, because the stock market is also moved by psychological factors." He also points out that "the important thing would be to monitor interest rates and inflation, and since inflation is so moderate, there may be room for it for now." Likewise, the president of the IEF rules out Trump's tariffs having a major impact on Spanish markets, and believes that rather "they will have a modest effect and only in some sectors, which are not the main ones in the Ibex."

Regarding the rest of the key stocks, Brun believes that Iberdrola "has little room" because "the percentage of renewable energy in wind farms in Europe is reaching a peak," and Inditex "is the only one that has fallen within the Ibex 35" and has more room. "I do expect Inditex to achieve double-digit profitability for the remainder of the year, but the others won't," Brun notes. "Therefore, we can expect a decline in the Ibex's performance in the coming months."