The European Central Bank (ECB) has once again demonstrated that it is ready to help the Community economies in moments as decisive as today. Because in effect, the monetary agency has approved a new loan program for banks in order to guarantee the necessary liquidity. To the point that its most striking measure has been to lower the interest rates on TLTRO III long-term loans to -1%. A fact that can encourage the equity markets from now on and that in particular can take the Ibex 35 to levels of 8000 points, which is its next goal to reach.
At the current prices on the stock market in our country, there is no doubt that the next objective of the Ibex 35 is to reach the level of 8000 points. But is this level really feasible in the selective index of Spanish equities? Reaching this point would mean an additional appreciation of close to 10% and therefore would require a lot of optimism among small and medium investors. Although it is very complex to achieve in the short term, it is not far-fetched in the medium and especially long term. Not surprisingly, it is one of the most notable supports that the index has in reference at the moment. Therefore, it is a level that must be carefully monitored from now on.
On the other hand, it cannot be forgotten that the weakness of the European women is a common denominator for their explanation. Where, this movement should be accompanied by positive data that we find very complex in the current circumstances. Of course, a good trigger to achieve these goals will be the discovery of a vaccine or drug for the treatment of coronavirus. In this case, the stock markets could have a very important rebound and that in the case of equities in our country could lead to 8000 points or even more demanding levels. And this fact can happen at any time and in an unforeseen way by small and medium investors.
Requirements for 8000 points
One of the requirements to reach these price levels in the Spanish stock market, as we mentioned, is that the will be the discovery of a vaccine or drug for the treatment of the coronavirus. This is a requirement that must be met in most of the variables that analysts handle in the equity markets. Although it is an exogenous element that is frequently set by the various financial agents. Therefore, it is very difficult for small and medium investors to foresee when developing their operations to make profitable their savings. Without being able to use many strategies in investment, at least in the short term from their current levels.
While on the other hand, it cannot be forgotten that another of the requirements for this scenario to occur is the resumption of economic activity in our country. A scenario that can be put into practice next June, as the government of our country has analyzed. On the other hand, it has to be seen what is the response from the consumer regarding users and that it may have a great impact on the evolution of the selective index of equities in our country. In particular, to reach the levels of 8000 points, which is the first phase of the recovery in the national stock market in the technical analysis.
Sectors that will rise
Once the Ibex 35 can reach the level of 8000 points, it will be necessary to analyze which are the stock market sectors that can best respond to this scenario in the variable income markets. Well, in principle, the most punished up to now are those who can best do it in this new and hypothetical scenario that is presented in the Ibex 35. Securities, such as cyclical, banking and especially those of the leisure and tourism sector. To the point that they will be able to trace their positions a little from that moment in time. In this sense, it must be emphasized that they can carry out hikes in the trading floors of more than 10% and therefore easier to make profitable in these periods of analysis.
On the other hand, it must also be emphasized that another of the values that can do better in the coming weeks is that represented by construction companies. Where there are values such as ACS that went from being worth slightly less than 40 euros to 12 euros in a few days. Although in this particular case, it has already recovered to levels that are still very unsatisfactory for the interests of small and medium-sized investors when its shares are priced at a little more than 20 euros. Something very similar to what has happened these days to other companies integrated in one of the most representative sectors of equities in our country.
Levels in recession
There is no doubt that another of the factors that will influence the evolution of the selective index of national equities, the Ibex 35, is the derivative of the levels in the recession in the economy of our country. Because in effect, its activity will be little less than essential from this moment on and therefore it can be one of the great beneficiaries of this new economic panorama that is presented to us in the coming months. And from this point of view, there is no doubt that their shares may revalue in the equity markets in the coming months or even in the best of cases in the coming years. Being one of the sectors to take into account to integrate it into our next investment portfolio. From any kind of profile in small and medium investors, from the most moderate to the most aggressive and with practically no exceptions of any kind.
On the other hand, it cannot be forgotten that in order to be calmer from now on, companies with this business profile should not be absent from the stock portfolio. There are some that have some highly diversified lines of business that help protect positions from buying driven by stock users. With the real possibility that in the end we will start from these movements in the bags. Since it is after all what is involved with this kind of operations in very complex moments for the equity markets in general. With a greater risk than in other historical times because in the short term there is no trend that is clearly differentiated from any kind of approach in this kind of relationship with the always complicated world of money.
Back to normal
Of course, it will be another of the most relevant aspects so that the Ibex 35 can reach the important level of 8000 points. So that in this way, more demanding levels can be considered from the summer months and that is one of the most immediate objectives for small and medium investors. Within this general context, it will be necessary to think about these days when it will be very important to return to the situation prior to the expansion of the coronavirus. At a time when equity markets may feel right now that investors have taken advantage of the rise to sell their positions on the stock market. In the upper part of the channel that has developed after the rebound that brought the selective index of the stock market in our country to levels of 6000 points.
Within this general scenario, for the increases to be more reliable, there will be no better scenario for things to return to normal, at least with regard to the return to work and economic production. If it is not in this way, the stock market rises will not be consistent enough to consider the downward trend that started in the first weeks of March has been overcome. Because much that the rebounds have been generated with great intensity. Where it cannot be forgotten that the global, European and of course Spanish recession enters fully into the panorama of companies that are listed on the markets.
And what is needed is that normality at work is a reality and in this way, the Ibex 35 can pick up this scenario in the conformation of its prices. With the possibility that it can be directed to higher levels than those raised in this article. It is, after all, one of the most immediate objectives for small and medium investors from now on.
The value line classification system
The Value Line Investment Survey is probably most famous for its proven Timeliness ranking system that ranks approximately 1.700 stocks relative to each other for price performance over the next six to 12 months, and Safety ™. The Value Line Technical Ranking is designed to predict stock price movements over a period of three to six months. In each case, stocks are rated from 1 to 5, with 1 being the highest rating.
The range of the Opportunity Value Line. From this perspective, it should be noted that the ranking of the value line in terms of timeliness measures the probable relative performance of the prices of the approximately 1.700 shares during the next six to 12 months on an easily understood scale that goes from 1 ( maximum) to 5 (minimum). Components of the value line rating system for timeliness include factors such as the 10-year trend of earnings and relative prices, recent earnings and price changes, and earnings surprises.
All data is real and known. A computer program combines these elements into a forecast of the price change of each stock, relative to all other classified stocks for the next six to 12 months. The 1.700-share Value Line universe represents approximately 90% of the market capitalization of all stocks traded on US exchanges.
-Rank 1 (Highest): These stocks, as a group, are expected to perform the best in relation to the Value Line universe over the next six to 12 months (100 shares).
-Rank 2 (Above Average): These stocks, as a group, are expected to perform relative price better than average (300 stocks).
-Rank 3 (Average): These stocks, as a group, are expected to have relative price performance in line with the Value Line universe (approximately 900 stocks).
-Rank 4 (Below Average): These stocks, as a group, are expected to have a relative price performance below average (approximately 300 stocks).
-Rank 5 (Minimum): These stocks, as a group, are expected to perform the worst in relative prices (100 shares).
Changes in the opportunity range can be caused by:
-New earnings reports or company forecasts.
-Changes in the price movement of a share in relation to the approximately 1.700 remaining shares of the publication.
-Variations in the relative positions of other stocks.
The safety range of the value line
A second investment criterion is the Security rank assigned by Value Line to each of the approximately 1.700 shares. This range measures the total risk of a stock in relation to the approximately 1.700 remaining stocks. It is derived from a stock's Price Stability Index and a company's Financial Strength rating, both displayed in the lower right corner of every page in the Value Line ratings and reports. Safety ratings are also given on a scale from 1 (highest) to 5 (lowest) as follows:
-Rank 1 (Highest): These stocks, as a group, are the safest, most stable and least risky investments in relation to the Value Line universe.
-Rank 2 (Above Average): These stocks, as a group, are safer and less risky than most.
-Rank 3 (Average): These actions, as a group, are of average risk and security.
-Rank 4 (Below Average): These stocks, as a group, are riskier and less safe than most.
-Rank 5 (Lowest): These stocks, as a group, are the most risky and least safe.
Stocks with high security ranks are often associated with large financially sound companies; These same companies also tend to have somewhat lower than average growth prospects because their primary markets tend to grow slowly or not at all. Stocks with low safety ranges are often associated with smaller companies and / or weaker than average finances; on the other hand, these smaller companies sometimes have above-average growth prospects because they start with a lower income and profit base.
Linked to periods of recession
Safety is especially important in times of stock market recession, when many investors want to try to limit their losses. As in the case of opportunity, the safety record over the years is impressive. When the data is studied, it is found that stocks with high Safety ranks generally fall less than the market as a whole when stock prices fall. The accompanying table shows how the Safety ranges performed in all the major market downturns between 1966 and the present.
The lesson is clear. If you think the market is headed lower, but prefer to hold a fully invested position in stocks, focus on Rank 1 or 2 Safety stocks. Also, at the same time, try to keep your portfolio as high as possible for Opportunity. You may not be able to find stocks with a high ranking in both cases. Then you must decide which is more important: price performance in the next six to 12 months, or safety. A compromise that involves selecting stocks rated 1 or 2 for punctuality and 1 or 2 for safety may be worth considering.
In all cases, it is necessary to emphasize the remarkable fact that the so-called universe of the Value Line of 1.700 shares represents approximately 90% of the market capitalization of all the shares that are traded on the United States stock exchanges. As one of the investment options, for example, in the selective index of equities in our country.