Is the Ibex prepared for a long-lasting bear market?

The Spanish stock market does not live in a permanent state of euphoria, but it has not had to facing a financial winter for too long. On the other hand, recent declines have brought a question that is normally avoided to the forefront. What if the next bassist wasn’t a passing scare, but a persistent scenario? In that case, the Spanish team might have to demonstrate a resistance that it has not tested in many years.

It is not about anticipating a crisis. Nor about exaggerating a specific movement. It is about understanding what would happen if Spain had to go through a long bear at a time when the global market changes its mood more quickly than usual.

A robust index, but with a short memory

Recent history offers some clues. In 2008, the Ibex fell more than 39%. In 2012, in the midst of tension over European debt, it reached around 6,000 points. In 2020, the pandemic caused a decrease of close to 15%. These episodes were intense, but relatively limited in time. After them came rebounds, technical decompressions and more or less slow recovery periods. What has not been seen since is a prolonged bear market spanning several years with sustained pressure on valuations and credit.

The structure of the Ibex adds important nuances to this analysis. The composition of the index is dominated by banks, energy and infrastructure companies. They are sectors with recurring income and solid balance sheets. They are also segments closely linked to financial conditions and monetary policy decisions.

When money is cheap, banks improve margins and consumption responds. When money is expensive, investment slows and corporate financing becomes more selective. In a long bearish cycle these factors not only set the pace of the market, they also set the pace of the real economy.

The contrast with other markets is evident, although not comparable. The S&P 500 is supported by technology companies with the capacity to generate double-digit growth even in adverse environments. The Ibex depends more of the pulse of Europe, domestic consumption and sectors where growth is moderate by definition. And in a prolonged bearish period that sensitivity becomes relevant because it determines the speed with which the index can digest adverse movements.

The latest business results show a mixed picture. Spanish banks have recorded significant increases in profits thanks to the rate hike, something reflected in their latest reports. Energy companies have stabilized income after a period marked by price volatility. Infrastructure companies maintain long-term contracts that act as a cushion.

This combination provides stability and, at the same time, limits the capacity for expansion in the long term. If a bear market continues, this structure can function as a shield against sharp declines, although it can also become a brake on attracting new capital in a more competitive global environment.

International dynamics are also relevant. The slowdown in Germany and doubts in France condition the economic pulse of the euro zone. Spain maintains moderate growth supported by tourism and domestic demand. If the global environment were to deteriorate over a prolonged period, the exposure to credit and consumption would play an important role. The resistance of the market would depend largely on the ability of the business community to maintain margins in a more demanding environment.

Investor psychology is also part of the equation. In Spain, the number of participants in pension funds and plans has increased. However, the profile remains conservative. Most portfolios combine fixed income, mixed and moderate risk products. In a long-lasting bear market, this preference would condition flows and could reinforce defensive movements. The stability of the market depends, therefore, on the sectors that make it up and the patience of those who support the index.

The role of the international context in this analysis is secondary but useful. While the global technology sector is experiencing a severe correction and the sustainability of investments in AI is being discussed, Spain observes the movements from a less exposed position, although not isolated.

Deteriorating global sentiment reduces demand for risk assets and also moderates inflows into Europe. The Ibex is responding to this dynamic with moderate adjustments, although sufficient to put on the table a question that had not been asked for a long time.

It is not about deciding whether the index resists or succumbs. The available information points to a mix of structural strength and cyclical vulnerability. The historical highs show that the Spanish market maintains the capacity to attract capital in favorable environments. But on the other hand, recent setbacks suggest that investors are not losing sight of a more uncertain global scenario.