Could the Ibex 35 have altitude sickness and plummet from 16,000 points?

It is true that years ago analysts were amazed at the quotas, lower than 8,000 points, that the Ibex 35 reached. The prices of its companies were irrationally low. There were cases that were lower than their book value (profits plus reserves), which was absurd.

The reason for that purchasing weakness in those years in the Spanish stock market was the lack of confidence of investors in their economy.

In fact, while other stock markets recovered more quickly, the Ibex 35 lagged behind. It was the time when Financial advisors advised investing in American funds and European securities.

Therefore, could it be said that the current Spanish stock market reflects confidence in the Spanish economy and its companies? In part yes. The growth rates of recent years are good (about 3% of GDP).

The main concern about political instability in Spain has been a nationalist issue

We have described the reasons for this growth in this column of the “Pin Code” many times, are: the strength of tourism; private and public consumption; the European Next Generation funds; the growth of diversified exports with an important non-tourist professional services component.

Also the shift of the world economy towards the service economy, of talent and knowledge, where Spain has an important gap if it knows how to fill it; investment in renewable energies that reduces dependence on crude oil exports; … ; contained wages with price inflation that increases business profits; the growth of self-employed workers who increase productivity, the emergence of a dynamic and powerful private university sector;… a growing demographic with emigration largely from Latin America with linguistic and cultural affinity….

Foreign investment, which although faltered in this second half, will recover in 2026.

Could there be a black swan that harms this horizon?

The main concern about political instability in Spain has been a nationalist issue. However, this instability seems far away in the short term and with signs of maintaining territorial coexistence for a while.

An early election would make little difference to this situation or even improve the feeling of political stability.

But the Government is running out of steam. At this point, no one trusts that there will be budgets for 2026 and even less so for 2027. Despite this, the Sánchez Government continues to commit to reaching 2027. in an unstable political balance to which investors seem accustomed.

Because an early election would change that situation little or even improve the feeling of political stability. If the current government with its multicolor coalition remains, nothing would have changed. If there is a center-right government with more stable support, investors would be more comfortable. Therefore, the electoral black swan does not seem to threaten the economic horizon. On the contrary, it would leave expectations the same or improve.

Another possible black swan may come from abroad. Trump’s trade war and the possible recession of Germany and/or France, the flagships of the European Union.

Trump’s trade war is getting on track. There will be blows, such as the increase in tariffs on Canada. But Trump negotiates to the limit and then backs down if necessary. In fact, an agreement with China is announced.

Recession in Central Europe is not ruled out. That could harm Spanish exports. For example, fresh fruit and vegetables. Also reduce the number of tourists if this recession were deep and prolonged over time.

Something not ruled out, but unlikely, because Tourism and healthy food have become necessary consumption for the middle classes.. On the contrary, a recession in those countries would force the ECB to keep interest rates low, which pushes up equities.

Consequently, a calm analysis of the situation is that 16,000 points is not such a high peak that investors in Spain lack oxygen and there is altitude sickness.

Rather, It can be consolidated and serve as a ground platform for the future, barring very adverse international circumstances.

Therefore, instead of “altitude sickness”, the normal thing is that the Ibex 35 still has some upward travel, with the natural saw teeth that always occur.

** JR Pin Arboledas is a professor at IESE.