IBEX at all-time highs: are the profits going to continue?

The Spanish Stock Exchange is experiencing a moment of euphoria. Eighteen years later, the IBEX 35 has reached all-time highs, surpassing 16,200 points and accumulating an increase of nearly 40% so far this year. There are reasons for this optimism to continue, although the best strategy in the face of this strong upturn would be to adopt a more prudent stance.

Alberto Matellán, General Manager of La Financière Responsable, emphasizes that “this trend may continue,” because there are strong fundamentals in the Spanish economy, its companies, and abundant liquidity. However, he adds some nuance: “I would be very cautious to avoid losing what we’ve earned. We are very close to end of the year, and it is time to reassess.” Thus, the economist recommends caution, “not because he thinks the trend is going to change, but because it is time to take a pause and to prepare for next year.”

In the midst of the earnings season for Spanish listed companies, Matellán notes that “overall, they have been good, considering such an adverse year” due to factors like tariff disputes and geopolitical issues. Compensating for this complex environment, there have been positive factors such as public spending plans across Europe. Although the overall outlook is very positive, Matellán also considers it important to “break it down by sector” to gain a more precise view.

The rise of the IBEX is not an isolated phenomenon, with green dominating in Europe, Wall Street, and Japan, among others. “There are global factors that support this trend,” explains Matellán, such as the good performance of companies and high liquidity, which is why he believes that “for now, it looks like this trend could continue.” Nevertheless, he warns that “liquidity is a fragile element—it could reverse at any moment, although we do not see that scenario right now.”

A new rate cut in the U.S.

In statements this Wednesday prior to the Fed meeting, Matellán noted that, in the United States, private data—in the absence of public information due to the government shutdown—points to “a certain slowdown in growth, and inflation continues to be stubborn.”

In this context, he believes that the message from Fed Chair Jerome Powell would be one of caution, which, in principle, is not consistent with the rate cut announced on Wednesday. However, he thinks that this decision could be supported by the data on available liquidity in the market. “Although there is a lot, there are specific points where it seems fragile and could give us a scare.” I think that is going to be the main argument for a more relaxed message and a possible reduction.

Regarding the major technology companies, Matellán believes they have the capacity to maintain very positive earnings figures. Supported by AI, in periods like the current one of technological innovation, there are often large gains followed by some disappointment, but the expert highlights that the companies leading this process “are very strong financially this time,” and can afford the heavy investments the sector is making, unlike other periods such as the Internet boom in the 2000s. For this reason, he assures that “there are reasons to believe that such strong profits may continue.”

Regarding the possibility of a bubble around artificial intelligence, Matellán believes that we are not in that scenario, “if we define a bubble as a price increase not justified by fundamentals.”

Regarding the European Central Bank (ECB), which also met this week, Matellán believes that Lagarde should maintain a message of reassurance. “We have controlled inflation, weak growth but with some improvement, and high liquidity. In this context it makes no sense to announce changes, but rather to wait and see. There will be no major changes in the coming months.”

Finally, regarding the Spanish economy, Matellán points out that the moderation of growth at 0.6% is in line with the consensus. “It makes sense for the context. We already know what the tariffs and the noise imply. I don't find it concerning. It fits with the current economic reality—we have grown a lot and it is normal for this trend to slow down at some point.” Although this slowdown will not lead to a recession or major changes in macroeconomics, “investors will have to manage it.”