The Ibex 35, Spain's benchmark stock index, is one of the worst performers this year, which is drawing to a close. However, it's worth noting that the Ibex 35 has appreciated by around 9% year-to-date. This return shouldn't be underestimated given the challenging year equity markets have experienced. Conversely, global stock markets have seen very positive performance, accumulating gains of over 10%, and in some cases even reaching 20%.
In this general context, it's worth noting that some stock markets in Europe have accumulated remarkable gains. This is the case with the Russian stock market , which has seen a 40% increase, although in this instance due to the rise in crude oil prices, as the Russian market is closely linked to this particularly important asset. Meanwhile, major equity markets have experienced growth ranging from 10% to 15%, exceeding the performance of the Spanish benchmark stock index.
While on the contrary, only the stock exchanges of Portugal and some Eastern European countries have had a worse performance than the Ibex 35. In some cases with a growth of only a few percentage points and that serves to value and analyze the paper of our equity market. In any case, the national stock market has been penalized in recent months by the lack of government and the uncertainty that has been created with the calling of the new general elections. To explain the behavior of domestic markets in this analyzed period.
The Ibex over 9.000 points
The important thing at the moment is that the benchmark Spanish stock index, the Ibex 35, remains above the important 9.000-point mark. In practice, this means that it has not yet entered a downtrend , although it is undoubtedly flirting with one constantly. It should be remembered that at times it has traded below these levels, to the point of driving a significant number of small and medium-sized investors out of the stock market.
On the other hand, it's important to emphasize that the Spanish stock market has been more negatively impacted than others due to a number of political factors, which have consequently hampered its performance to date. In this regard, it should be noted that the General Council of Economists (CGE) estimates that internal uncertainty stemming from the lack of a government in Spain is reducing economic growth by up to three-tenths of a percentage point. Meanwhile, the Spanish stock market has been trading between 9.000 and 9.400 points since last June.
Lower rise than the European
In any case, one thing is clear: the rest of the European stock exchanges maintain more satisfactory intermediation margins for the interests of small and medium-sized investors, and this holds true for almost the entire trading year. The exception is a few very specific sectors, such as the electricity sector, which is closely linked to the performance of the Ibex 35. In this regard, it's worth noting that five companies are listed on the Spanish stock market index, more than on other major exchanges in Europe.
On the other hand, this has been a constant over the last five years, with only a few brief exceptions. At the same time, the declines have been less pronounced than in European international markets. To the point that one might wonder if it wouldn't be better to invest in these markets to maximize returns on investment capital, where profit margins can be improved by approximately 2% to 5% . This comes at the cost of paying somewhat higher management and maintenance fees, with an additional surcharge of around 25%.
Bank dependency
If there's one thing that characterizes Spanish equities, it's their strong ties to the financial sector, which means that losses in the stock market index are ultimately greater if banks lead the declines in the sector. This scenario has occurred frequently and has undoubtedly dampened the expectations of small and medium-sized investors who have opted for this European market. It has also been one of the reasons why the Ibex 35 has underperformed compared to its closest neighbors.
Another aspect that requires detailed analysis is the greater dependence of Spanish stocks on Latin American equity markets, particularly those in Argentina, Brazil, and Mexico . This excessive dependence has sometimes led to the Spanish benchmark stock index deviating from its most strategic markets on the continent. These discrepancies have been noted by many financial analysts, to the point that they have reached levels of almost one percentage point in a single trading session—a truly excessive margin for countries belonging to the European Union.
20% divergences with the American
But we mustn't forget the fact that European and American stock market indices have accumulated double-digit returns , in some cases approaching 20%. That is, higher than ours, and in some cases with quite significant differences. Although this requires currency exchange in all transactions, with associated costs that can reach 2% or 3% of the capital invested in each stock market operation.
In addition, it is always more comfortable to choose domestic markets and their ease of targeting a wide range of stocks from all stock markets. Where we can formalize operations, not only in its online format but also physically from bank branches or even from a mobile phone. Just as we did until a few years ago.
Opt for the European income
However, there's always the option of turning to one of the many indices available on the continent, especially through investment funds based on European equities. These funds allow investors to be represented in European equities without being directly exposed to the stock market, and they don't have to bet on a specific stock since they will invest their money in the most representative companies in the Eurozone.
The main drawback is that holders of this financial product cannot fully realize any potential capital gains generated by the European stock market. Furthermore, management and maintenance costs, as well as commissions, are higher than those associated with investing in the Spanish stock market. In very specific cases, these costs can reach up to 3%. This raises the question of whether retail investors can afford this higher expense when it is not truly necessary. Each investor will have to find a solution to this potential problem.
Emerging markets: more risks
Investing in emerging markets is a completely different matter. Some asset managers, though not many yet, have launched equity funds that invest in stocks from the Brazilian, Russian, Indian, and Chinese markets . These funds are based on building a portfolio of shares in large-cap companies from these countries and aim to generate returns based on the growth potential of companies located in these geographic areas. However, this approach is geared towards a high-risk profile and a medium- to long-term investment horizon of two to five years.
In some cases they have the serious disadvantage that they have to subscribe in dollars instead of euros, but also in other cases the minimum subscription is not too high, between 2.000 and 15.000 dollars, which can make this product suitable. for a large part of households. The best utility of its contracting is that it allows savers to take positions in emerging markets without having to carry out the purchase and sale operations that the parquet floors of their respective countries require, and which undoubtedly represents an additional problem for the financial user. that he is not used to operating in these international markets. A really excessive margin for countries that belong to the European Union and that can choose investment in one direction or another.