As the end of the year approaches, the IBEX is indeed standing out; the Spanish index is up 39% so far, making it the best performing European index this year.
Last week, the index hit a new all-time high, surpassing its 2007 record. It has therefore taken 18 years to erase the consequences of the financial crisis and then the eurozone crisis, during which Spain was particularly badly hit.
This performance is notably due to the weight of banks in the Spanish index (three of the top five companies by market capitalization on the IBEX are banks). Indeed, the banking sector has been the best performer in Europe this year: the Stoxx 600 Banks index has risen 60% since January 1.
A leading economy
But this also reflects Spain's strong economic fundamentals. In fact, last weekend we described the comeback of the Spanish economy.
Spain has one of the highest growth rates in the eurozone, while reducing its deficit to below 3%. It is expected to reach 2.5% of GDP in 2025 and 2.3% in 2026.
Next year, Spain's deficit will even be lower than Germany's for the first time in two decades. Germany is in a completely different situation. The historic champion of fiscal discipline is preparing to open the floodgates to invest heavily in its defense and infrastructure.
But for now, German growth is struggling to pick up. In contrast, on Monday, the Spanish government once again raised its growth forecast for this year to 2.9%.
These strong fundamentals are reflected in the bond markets. The spread between the Bono-Bund (Spanish and German rates) has fallen below 50 basis points.
