Pedro Sánchez began a new term as Head of Government, sealing a government pact with ERC, PNV, and Sumar, alongside Junts, Carles Puigdemont’s party. On the same day, the Ibex 35 rose 0.28 percent to 9,667 points, topping a week in which the index reached its highest level since February 2020 with a 4.2 percent weekly gain. The ascent comes despite ongoing legal questions and what business leaders describe as an increasingly challenging operating environment.
Employer organizations blasted the amnesty law behind the investment agreement. CEOE, Cepyme, and Empresarios Círculo joined voices from corporate leadership, including Mercadona president Juan Roig, Mapfre chief Antonio Huertas, and Valencian shipowner Vicente Boluda. Their message was clear: government plans risk loading more costs onto companies, hindering growth and job creation.
Amidst these debates, Bank of America released a monthly survey showing Spain ranked as a challenging destination within the Eurozone for investment. The report spotlighted a long-term trend: the Spanish stock market has seen a marked decline in trading volumes, dropping from 962.166 million euros in 2015 to 362.105 million euros in 2022. Analysts added that Moody’s has warned about possible downgrades, reflecting concerns over the nation’s fiscal and political landscape.
So what explains the Ibex 35’s recent strength given this mix? Supporters argue the Spanish equity market benefits from the exposure of its listed companies to global demand rather than local conditions alone. The index has broad reach in Latin America, the United States, and the European Union. They point to external drivers like the actions of the Federal Reserve and the European Central Bank and the expectation that official rates will stay steady through mid-2024, with markets pricing in potential rate reductions later in the year to prevent a sharp cooling of economic activity. This perspective comes from Víctor Alvargonzález, founder of Nextep Finance, a firm focused on independent financial advisory.
Still, policy concerns linger for investment funds and international players. Analysts warn that policy choices could affect the real economy, affecting SMEs and investment plans both abroad and at home. The critical factor, they say, is legal stability, a criterion some argue the current government has not fully delivered. Javier Niederleytner, a professor at the IEB, notes that the agreement between PSOE and Sumar includes proposals for extending contracts and could tighten corporate taxation with a minimum levy of 15 percent on banks and energy firms.
As a rule in markets, political tension and policy uncertainty tend to dent activity, dampen confidence, and squeeze funding conditions in the long run. While earnings growth is expected to be robust next year, the Spanish market currently trades at a price-earnings ratio around 10.6 times, roughly half of the multiple seen on Wall Street, according to broker firm CMC Markets. These numbers reflect a market navigating a delicate balance between global rate expectations and domestic political risk.
Portugal’s Trajectory Sets a Comparative Benchmark
News from the Iberian Peninsula shows Portugal cutting yields on its ten-year bonds and maintaining a risk premium below the level seen in Spain, currently around 62 basis points. The Spanish risk premium, once a point of fear for some investors, has dipped below 100 basis points for the first time since June. The divergence highlights how regional dynamics can influence investor sentiment, even as Spain seeks stability after Sánchez’s re-election.
A specialist in regional growth notes that Portugal’s recent performance has benefited from political steadiness and a stronger economic push, suggesting that Spain faces not just national challenges but regional competition as well. The argument here is not about ideology but about structural factors that shape long-term growth and investor confidence. In that light, the market’s reaction to Spain’s policy direction remains a decisive factor for foreign capital, local employment, and corporate investment plans.
In sum, the Spanish market’s behavior reflects a blend of global liquidity, central bank expectations, and domestic political dynamics. Investors are weighing the potential for continued economic expansion against the risk of regulatory shifts and tax changes that could alter corporate profitability. The coming months will reveal how resilient the Ibex 35 proves to be as policy debates unfold and as international market conditions evolve.