IBEX35 still not reflecting "The Great BabyBoomer Retirement"
Today in Spain a scandal has been revealed about how to pay 60% more pensioners with the same number of employed people. The baby-boom generation is starting to retire, and it is expected that by 2050 there will be 6 million more pensioners and the same number of workers. There are currently 21 million employed (taxpayers) and more than 9 million pensioners. The government has already exhausted the pension fund and has been using credits to cover the deficit of 50 billion euros per year. According to the European Commission's Ageing Report 2024, this problem is expected to worsen, not only in Spain, but also in countries such as Lithuania, Slovenia and Portugal, due to high replacement rates and low birth rates.
The governor of the Bank of Spain, Pablo Hernández de Cos, warned that burdening the working population with more taxes will break the pact between generations. The baby boomers will retire over the next 17 years, and there will not be enough employees to sustain the system. In addition, the Toledo Pact and updating pensions with the CPI will further increase costs. Spain has depended on immigration for demographic growth given that the birth rate has been negative for some time due to the difficulty of access to housing and stable jobs, but the majority of immigrants are of low productivity and qualifications well below the national average, which does not solve the problem but increases public spending not only in retaining massive irregular immigration coming mostly from sub-Saharan Africa but in the unconscious form of access to subsidies that this and previous governments have granted to them. This is not a panacea but an added part of the problem, since it adds fuel to a fire that only increases public spending, as it is a type of migration without sense or control.
Back to the markets, European stocks start their week this June 24, St. John's Day, flat after receiving the results report of mining stocks with contained gains during the French elections. The government has asked BBVA for a takeover bid option that does not imply the full integration of Sabadell but rather seeks synergies and can maintain the Ticker in the IBEX35 market. For long term investors, this could be considered a good moment to enter the Spanish market at this time given that the financial sector has always weighed heavily on the index and with the arrival of the rate cuts this moment could be interesting for stocks with predictable returns (Bond Proxies), given that the IBEX 35 has a few, which can make it the most attractive index in Europe in terms of valuation and potential. With a rising US market that omits the word "recession" a sharp correction could be on the table.
In relation to Europe the election issue has cleared an X and now possibly other doubts about investing in the European market will be raised. There have been times when the markets have risen as a whole and this is one of them, but the handicap of Spain at this time is that the Spanish stock market has not only not improved but has worsened and the fact is that investors as a whole have lost interest in the Spanish stock market, each time less volume is noted and it is a stock market where it is perceived that it is developing downwards.
• Energy: Iberdrola is similar to Inditex in the utilities sector due to its geographic diversification and installed capacity, although Endesa could follow it in terms of share price. This year has been unfavorable for energy companies due to the slight fall in electricity prices and interest rates that did not fall as much as expected.
• Renewables: Solaria and Acciona have been very affected by short traders, resulting in very low prices. Red Eléctrica is an interesting option compared to Enagás, which has higher risk. Redeia offers a better dividend yield and is more stable, with a key role in electricity distribution for 2026-2030, which makes it attractive.
• Infrastructure: Sacyr shows great long-term hidden value, while Ferrovial has a more balanced valuation.
• Textile: Inditex is a benchmark in the sector, contributing 30% of the Ibex35's earnings. It is superior to H&M and Shein because of its unique business model, both in physical and online presence.
• Telecommunications: Telefónica faces challenges in a mature sector, with limited growth in Latin America due to competition and its high debt, and a high dividend.
• Petrochemicals: Repsol has made good moves in production and renewables, with a high dividend yield. However, oil companies are very sensitive to macroeconomic and political situations.
• Real estate: Merlin manages two socimis, Criteria and Colonial, the latter being highly discounted in price. Criteria is popular with investors.
• Logistics: Logista has a solid financial position and a low-risk business with an attractive dividend. It is important that its largest investor, Brand Imperial, maintains its positions.
• Tourism: AENA is a solid option, while IAG, Meliá and Amadeus are very cheap companies. Meliá could exit the Ibex, although this will not affect its intrinsic value.
• Extremely overvalued: Fluidra and Laboratorios Rovi
• IBEX Medium and Small Caps: Catalana Occidente, Ebro Foods, Neinor Home and Ence are interesting companies.
Looking at the index chart it appears to be moving in the area between the 10,825.94 point low and the 11,476.05 point high. The movement since the elections has begun to correct upwards and it is possible that this summer it will remain in the direction of the control point zone (POC) 11,331.53 points. Seeing such a corrected European market and with such a Spanish spread weighted in highly healthy companies it will not be unusual to see this high point breached. The RSI signal was given on the 21st and at the moment the RSI is at 54.44% with the appearance of wanting to evolve upwards. We will see if these processes develop again to overcome the stage of maximums.
Ion Jauregui - ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
The governor of the Bank of Spain, Pablo Hernández de Cos, warned that burdening the working population with more taxes will break the pact between generations. The baby boomers will retire over the next 17 years, and there will not be enough employees to sustain the system. In addition, the Toledo Pact and updating pensions with the CPI will further increase costs. Spain has depended on immigration for demographic growth given that the birth rate has been negative for some time due to the difficulty of access to housing and stable jobs, but the majority of immigrants are of low productivity and qualifications well below the national average, which does not solve the problem but increases public spending not only in retaining massive irregular immigration coming mostly from sub-Saharan Africa but in the unconscious form of access to subsidies that this and previous governments have granted to them. This is not a panacea but an added part of the problem, since it adds fuel to a fire that only increases public spending, as it is a type of migration without sense or control.
Back to the markets, European stocks start their week this June 24, St. John's Day, flat after receiving the results report of mining stocks with contained gains during the French elections. The government has asked BBVA for a takeover bid option that does not imply the full integration of Sabadell but rather seeks synergies and can maintain the Ticker in the IBEX35 market. For long term investors, this could be considered a good moment to enter the Spanish market at this time given that the financial sector has always weighed heavily on the index and with the arrival of the rate cuts this moment could be interesting for stocks with predictable returns (Bond Proxies), given that the IBEX 35 has a few, which can make it the most attractive index in Europe in terms of valuation and potential. With a rising US market that omits the word "recession" a sharp correction could be on the table.
In relation to Europe the election issue has cleared an X and now possibly other doubts about investing in the European market will be raised. There have been times when the markets have risen as a whole and this is one of them, but the handicap of Spain at this time is that the Spanish stock market has not only not improved but has worsened and the fact is that investors as a whole have lost interest in the Spanish stock market, each time less volume is noted and it is a stock market where it is perceived that it is developing downwards.
• Energy: Iberdrola is similar to Inditex in the utilities sector due to its geographic diversification and installed capacity, although Endesa could follow it in terms of share price. This year has been unfavorable for energy companies due to the slight fall in electricity prices and interest rates that did not fall as much as expected.
• Renewables: Solaria and Acciona have been very affected by short traders, resulting in very low prices. Red Eléctrica is an interesting option compared to Enagás, which has higher risk. Redeia offers a better dividend yield and is more stable, with a key role in electricity distribution for 2026-2030, which makes it attractive.
• Infrastructure: Sacyr shows great long-term hidden value, while Ferrovial has a more balanced valuation.
• Textile: Inditex is a benchmark in the sector, contributing 30% of the Ibex35's earnings. It is superior to H&M and Shein because of its unique business model, both in physical and online presence.
• Telecommunications: Telefónica faces challenges in a mature sector, with limited growth in Latin America due to competition and its high debt, and a high dividend.
• Petrochemicals: Repsol has made good moves in production and renewables, with a high dividend yield. However, oil companies are very sensitive to macroeconomic and political situations.
• Real estate: Merlin manages two socimis, Criteria and Colonial, the latter being highly discounted in price. Criteria is popular with investors.
• Logistics: Logista has a solid financial position and a low-risk business with an attractive dividend. It is important that its largest investor, Brand Imperial, maintains its positions.
• Tourism: AENA is a solid option, while IAG, Meliá and Amadeus are very cheap companies. Meliá could exit the Ibex, although this will not affect its intrinsic value.
• Extremely overvalued: Fluidra and Laboratorios Rovi
• IBEX Medium and Small Caps: Catalana Occidente, Ebro Foods, Neinor Home and Ence are interesting companies.
Looking at the index chart it appears to be moving in the area between the 10,825.94 point low and the 11,476.05 point high. The movement since the elections has begun to correct upwards and it is possible that this summer it will remain in the direction of the control point zone (POC) 11,331.53 points. Seeing such a corrected European market and with such a Spanish spread weighted in highly healthy companies it will not be unusual to see this high point breached. The RSI signal was given on the 21st and at the moment the RSI is at 54.44% with the appearance of wanting to evolve upwards. We will see if these processes develop again to overcome the stage of maximums.
Ion Jauregui - ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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