When there is no year-end session to close things out, the Ibex 35 finished the year at 10,087 points with a 21.20% gain. It stands as the strongest annual result since 2009, a year that saw the index rise 29.84%. Banks, led by Rovi, Inditex, and BBVA, drove the Ibex higher in a year characterized by general and municipal elections that led to the formation of a government, a rise in interest rates, and the reopening of banks. A new conflict in the Gaza Strip added to the global tension. In this context, the Spanish index earned a podium position in Europe, ranking second behind Italy’s FTSE MIB, which advanced 25.90%.
The Ibex 35 surpassed multiple records, notably in the months leading up to the year end. By late November it surpassed the psychological threshold of 10,000, nearly three years after the COVID-19 shock. Recently, Inditex surpassed its June 2017 peak, becoming the second-largest company in the index with a market value around 124.5 billion euros. Following news that its headquarters would shift to the Netherlands, a move favored by investors, Ferrovial reached new highs after announcing the sale of its 2.7 billion euro stake in London Heathrow airport at approximately the same time.
Yet the market did not move in a straight line. The collapses of Silicon Valley Bank, Signature Bank, and Credit Suisse triggered weeks of declines in European banks, including six banks within the Ibex, at times by as much as 10%. In three weeks, Spanish banks shed about 87 billion euros, roughly 14.7% of their total market value as global institutions faced bankruptcy in the United States on March 9.
Despite the midyear tremors, the Ibex 35 recovered and outperformed many European peers. The German DAX40 finished the year with an 18.73% gain, while France’s CAC 40 rose 14.54% and the Euro Stoxx 50 gained 17.27%. The British FTSE 100 ended 2023 with a modest 2.91% return, marking the first full year under Prime Minister Rishi Sunak following Liz Truss’s abrupt resignation in October 2022. In Europe, Italy led with a 25.90% rise in its main index FTSE MIB. Italy’s banking sector faced a brief setback in August when a new 40% tax on extraordinary banking profits caused a temporary revenue dip of about 9 billion dollars.
If the Ibex 35 is compared to U.S. markets, it outperformed the Dow Jones, which gained 13.48%. The Nasdaq delivered a remarkable 54.60% surge driven by advances in artificial intelligence led by Nvidia and Meta, while the S&P 500 rose 24.40% for the year.
Inditex and banks emerge as the principal drivers
The strong Ibex 35 performance is explained by the rise in banking securities, which comprise about a quarter of the index’s components. BBVA, for its part, climbed 55.83%, becoming the fourth most valuable constituent after Rovi, Inditex, and ACS, and lifting the sector as a whole. An analyst from XTB notes that gains were initially propelled by higher interest rates, but later faced pressure from anticipated central-bank rate cuts.
Both the U.S. Federal Reserve and the European Central Bank maintained policy rates in a tight band, with the Fed holding around 5.25% to 5.5% and the ECB at 4.5%. In late-year press conferences, the governors signaled possible rate reductions in 2024, fueling investor optimism and pushing down yields on bank bonds.
Analysts also expect ongoing adjustments: the government intends to maintain an extraordinary bank tax that weighs on sector profitability, at 4.8% of typical income for 2022 and 2023. An analyst from Bankinter notes that the measure reduces sector attractiveness and shareholder remuneration because it dampens capital generation capacity in the country amid an uncertain macro backdrop.
Leadership from the company headed by Marta Ortega also contributed to the Ibex 35’s performance, delivering a 64.53% rebound. Despite a 6.7% slowdown in sales between August and October and the closure of 84 stores in Israel due to regional conflicts, Inditex posted 4.102 billion euros in revenue in the first nine months of the year. A market analyst attributes this strength to ongoing investments, execution of longer-term plans, and new leadership signaling continued growth to investors.
A better 2024 ahead?
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After a solid year, analysts approach 2024 with cautious optimism. The Ibex 35 has touched 10,000 points and faces a potential resistance around 10,250. An analyst from eToro highlights that weakness and pauses in sectors like banking will be pivotal in determining the next move.
Still, there is reason for optimism. While the gains of the past twelve months are unlikely to repeat exactly, another analyst notes that the coming year could be calmer. Bankinter strategists point to a cooling in inflationary pressures, the start of a rate-cut cycle, improving corporate earnings, and a more favorable geopolitical climate as a backdrop for bond and stock markets in 2024, while cautioning that recessions or a drift in expectations may occur if inflation rises or if there is greater-than-expected economic weakness.