Most analysts think that the European stock markets, and particularly the Spanish bourse, have taken an excessive beating over the last few sessions. Irrespective of the decisions of the central banks, fund managers are recommending to take advantage of recent corrections to take positions in the markets. In their opinion, the recovery in activity in the euro area will be accompanied by an improvement in share prices in the coming months.
The US markets are twice as expensive as their European peers. Afi has carried out an analysis of the eurozone indices, taking into account the last 10 years’ earnings adjusted for inflation. The result is that they are trading way below their historical average, and so are undervalued.
Much of the same has happened with the Ibex 35. It is the worst-peforming European index so far this year, mainly due to the big Spanish companies’ greater exposure to Latin America. Afi also makes the point that the increase in earnings at the Ibex 35 companies is not due to a recovery in sales, but in margins.
For the Spanish index to climb to levels of 11,000-11,500, improved profitability will need to be based on an increase in sales figures.
But all these analyst forecasts could go by the board if the central banks don’t get their strategies right. The market had already discounted the Fed’s 0.25% rate hike announced yesterday and, for the time being, it only anticipates two further rises in 2016.
The ECB is expected to maintain its expansive policies for a long time, but with a more aggressive stance than was transmitted after its last meeting.
The other global focal point will be, undoubtedly, the trend in raw material prices. Nobody expects oil prices to rebound strongly in the coming months, but that at least the price of Brent once again exceeds $50 a barrel.