Spain’s IBEX 35 has endured a challenging period since mid-2021. The benchmark for the country’s top 35 companies fell more than 40% from roughly 10,000 points between February and March 2020, then regained ground as health conditions improved. By June of the prior year, much of that decline had been recovered, settling near 9,300 points, about 7% below the pre-pandemic peak. The index resembles a mountain goat navigating a downward slope, characterized by a pattern of lower highs and lower lows across the chart.
The economic outlook did not brighten quickly. In June, the Bank of Spain reduced its growth forecast for 2022 from 4.5% to 4.1%. Projections for 2023 and 2024 sit around 2.8% and 2.6%, respectively. Inflation remained a persistent challenge, eroding household purchasing power with a monthly rate that reached 10.8% at one point, a level not seen since 1984.
As of June 2021, the Spanish index had rebounded nearly 60% from its pandemic troughs. Yet many companies and sectors experienced uneven results. Banking carries significant weight in the IBEX’s movements, with three major lenders accounting for about 23% of the index: CaixaBank, Santander, and BBVA. CaixaBank recently traded around €3.64 and then slid to about €3.02, a decline near 17%. Santander, led by its executive chairman, saw a drop of roughly 26% from a high of €3.50 reached last May. BBVA hovered near €4.70, about 25% below its November 2021 peak. The banking sub-index tracked by Investment Strategies showed a sharp negative drift of roughly 27% from February to August 2022.
Nevertheless, signs of a shift began to appear this year as investors debated the possibility that inflation might ease in the coming months. A recent ING report emphasizes this evolving climate, noting that Europe could face a modest recession but with risks such as potential disruptions to gas flows in the autumn.
Real estate
The real estate sector continues to weigh on stock market sentiment, though individual outcomes vary widely within the property universe. Metrovacesa, a developer with notable ownership by Banco Santander and BBVA, declined only about 6% year-to-date as a bid led by Mexican investor Carlos Slim acted to stabilize the asset and preserve value for stakeholders.
Another influential factor is limited free float, which can amplify price movements when a few players hold large blocks of shares. Aedas Homes, a housing developer, has endured more than 40% negative revaluations. The Castlelake fund controls roughly 71.5% of the company, so even modest share movements can move the price noticeably.
Leading real estate investment trusts within the IBEX, known as Socimis, such as Merlin and Colonial, have shown varied behavior in recent months. Merlin, under the leadership of Ismael Clemente, has delivered flat performance since the start of the year but faced volatility after selling a sizable portfolio of bank branches for close to €2,000 million. Colonial traded near €6.65 per share during the pandemic lows, then posted a rebound of about 14%, yet remains more than 30% below its June 2021 high.