Small and medium investors are getting a good scare when they see how the reference index of the national market, the Ibex-35, is suffering a collapse in its prices, little less than unthinkable until a few months ago. Specific, the decline in the Spanish stock market at the beginning of this new year is around 10%. One would have to go back many decades to verify such a discouraging start to the year for the variable income, and with red numbers in all values, without exception.
It is true that it is not an isolated scenario, but it is affecting all international stock exchanges, from the Atlantic to the Pacific. In a very vertical way, and with hardly any respite to any rebound through which operations can be closed to avoid greater evils. Right now, what investors want to know is if it is a one-off movement, or on the contrary, it is a definitive change in trend that will be perpetuated throughout this year.
Anyway, the national benchmark is being the hardest hit, and falls with greater force than in the other stock markets, due to the nervousness and concern of individuals who have taken positions in the financial markets. Not surprisingly, savers are losing a lot of money on their investments in the early stages of 2016, and they are more pronounced in some sectors more than in others: banking, industrial and oil bear the worst part, with depreciations around 15 %.
Worst performance of the Ibex
What there is no doubt is that the benchmark index of the Spanish stock market is doing worse than others in its immediate environment. This fact is leading investors to close their positions in equities, or even to divert it to other less vulnerable stock markets at the moment. However, in order to detect the real state of Spanish equities, it will be necessary to decipher why it is doing it this way, and above all what are the variables that are determining its evolution in the markets.
There is no single cause to explain this adverse scenario, but they are due to various factors, and of various nature, as pointed out by the most prestigious financial analysts. And that added all, is influencing that the Ibex-35 is close to the barrier of 8.000 points, when just a few months ago it was quietly raised at 10.000 points. Moreover, if the weakness continues in the selective, the experts do not rule out that its price may even go up to around 7.200 points.
In any case, the Spanish stock market lost more in the first weeks of the year than in the whole of 2015, almost doubling the losses. With little respite, where the sellers are winning the game over the buyers with total clarity, and as it had not happened in a long time. Not surprisingly, it is returning to levels never seen in the last three years, and it would be necessary to go back to the worst years of the economic crisis to find prices so low in the Spanish stock market.
Political instability
It is one of the factors, without a doubt, that is causing Spanish equities to fall with this infrequent virulence. The uncertainties to form a governmentEven if the possibilities are open for the elections to be repeated next spring, it is driving away foreign investors, and nationals are not deciding to take positions in the markets. An explosive cocktail that is not helping the markets at all.
This is one of the explanations to detect why the national stock market is doing worse than others in its natural environment: Dax, Cac-40 or the London Footsie 100. The discount at which its shares are listed is almost 5% with respect to these European markets. It is enough to remember that during 2015 these closed in green, with gains between 3% and 10%, while the Ibex-35 was one of the few (together with the Greek stock market) that was in negative territory, with a depreciation of 7%.
However, and for these same reasons, some market analysts believe that once the uncertainty that grips the Spanish economy has been eliminated, its stock index it would be one of those with the longest journey for the next few months (or years), and could even do better than the sister exchanges within the Monetary Union. The discount with which it quotes is more than appreciable during the last months.
Greater weakness in your index
The Ibex-35, on the other hand, is one of the indices with the greatest weakness of all. The reasons are very clear, in the previous months it has not been able to break any resistance of any importance. And on the contrary, it has exceeded high-level supports. First in the 9.500 points, and later in the 9.000. As a consequence of this trend, sales have clearly been imposed on purchases. And what is worse, there is still no indication that a ground has formed where this fall will stop.
In fact, buyers are scarce, and only some purchases are made - speculatively - to take advantage of the low prices at which the shares are traded. In very short-term operations that are directed by the main international brokers, and not by small and medium investors. These, given the weakness of the markets, are waiting, either for things to improve, or to buy at cheap prices.
The worst scenario is for individuals, such as your case, who are positioned in the market. You don't have many choices to solve your problem. Either they wait for the water to return to its course, or they simply sell their shares with a handicap. It is the dilemma that you are faced with the fear that the losses may become more acute during the next trading sessions.
The slowdown in china
Not all the problems of the national stock index are of a domestic nature. Not much less. One of the biggest concerns around the world is that China's economy makes a hard landing, that is to say, that its problems are even greater than those reflected in its main macroeconomic data. It would be the origin of a new and serious economic recession worldwide, and that would bring very negative effects to all stock markets, without exclusions.
To verify the importance of this problem, it is enough to verify that, for the first time since the outbreak of the international financial crisis, the Chinese economy has registered a growth during the last quarter around 6%, according to data recently provided by the National Statistics Office of the Asian country. And in any case, it is below market expectations.
One of the first reactions has come, how could it be less, from the stock markets that have collapsed, with a crash in some sessions. Cutting the upward trend with which they have been moving for four years. Not surprisingly, there is a fear that the real data will be worse, and even It is not ruled out that the dreaded Chinese bubble could burst at any moment. If this were the case, it would be a severe blow to all the stock markets, with devastating consequences for listed companies.
What are the bags interpreting?
If you have been an investor for many years, you should know that the stock markets anticipate, with several months, the new economic scenarios. This has generally been the case during its long life. In fact, it has warned of the onset of major crises, recessions and even conflictive scenarios in the world economy.
It is always ahead, and ahead of events with great naturalness, which undermines the taking of positions in the markets by retail investors. By not having the necessary information to carry out its main operations in the equity markets.
From this perspective, there are more and more prestigious voices that warn that what is happening right now with stock exchanges, is that they are discounting a new recession at the global level. For this reason, these sources point out, the share prices could go even lower during the next few years, and to the despair of investors who have a portfolio of securities, as it may be in your specific case.
The International Monetary Fund (IMF) has lowered its global economic growth prospects for 2015 and 2016. The institution, in fact, has lowered its projections worldwide by several tenths. Stating in a press release that "we make our forecasts at a time when the world economy is at the intersection of at least three powerful forces." One of them precisely derived from the economic weakening of the Asian giant.
Faced with this worrisome scenario, you should not expose yourself to your savings going to equities. At least you will have to wait a few months until the panorama, both in Spain and in the rest of the world, clears up. You must be in liquidity to take advantage of business opportunities that will surely be presented to you at any time, and when you least expect it.
If instead, you have your savings invested in the stock market, the situation will be much more conflictive for your interests. It may be a bit late to formalize the sales, but you should also keep in mind that share prices can go much lower in the next trading sessions. In any case, a dilemma that you will surely have, and that You can only pay based on the profile you contribute as a retail investor.