Invesco maintains its optimism regarding Spanish equities and believes the Ibex can continue to rise. The firm highlights the strength of banks and the boost for utilities due to electrification.
Invesco, one of the largest fund managers in the world, has expressed its confidence this Monday that the Spanish Stock Market will continue its upward rally. Despite the Ibex 35 accumulating historic gains in recent years, the firm believes that key sectors such as banking and utilities still have room for growth.
Fernando Fernández-Bravo, head of active distribution in Iberia at Invesco, noted that Spanish banks remain attractive in an environment with interest rates at 2.25%. "We still like Spanish banks in an environment where they have room to perform well," he stated during a presentation to journalists. He also reminded that Spain is growing above the European average and that major banks have international exposure, which diversifies their risks.
The firm is also positive about the energy sector, both in Spain and Europe. The electrification of the economy, driven by electric vehicles, data centres, and decarbonisation, benefits utilities. "The Next Generation funds are helping utilities towards that transition," Fernández-Bravo explained. In the case of Spanish utilities, he highlighted that they are "very diversified," an advantage following the crisis in the Strait of Hormuz that underscored the need for alternative energy sources.
Betting on emerging markets and caution with AI
Invesco has also shown a preference for emerging markets, particularly South Korea and Taiwan, albeit with some caution. The firm expects the dollar to weaken in the coming months, which would benefit these economies. However, they have started to reduce exposure in these countries because semiconductor exports "are doubling and tripling their levels from recent years," something they consider unsustainable in the short term. "We are seeing these types of companies as a bit expensive," Fernández-Bravo clarified.
Regarding artificial intelligence, the firm takes a cautious approach. It prefers to wait and see how its application is monetised before increasing positions in software. For now, they are focusing on semiconductor companies, infrastructure for data centres, commodities like copper and rare earths, and energy. "The American Stock Market has performed very well, mainly due to artificial intelligence, but we believe that other geographical areas can perform just as well," the executive added.
Diversification beyond equities
Invesco recommends not putting all eggs in one basket. The firm suggests diversifying with gold, real estate assets, and private credit to protect against volatility. In a context of still high interest rates, although decreasing, the firm believes these assets can offer attractive returns and serve as a hedge.
For individual investors, Invesco's view reinforces the idea that the Spanish Stock Market remains a viable option, especially in sectors like banking and energy. However, caution regarding artificial intelligence and the bet on emerging markets suggests that it is wise to pay attention to the evolution of the dollar and the sustainability of technological export growth. The firm advises maintaining a balanced portfolio and not getting carried away by excessive optimism in the markets that have risen the most.
In short, Invesco sees potential in the Ibex, but with nuances. The key is to select sectors well and not forget about diversification. As a practical note, investors interested in following this strategy can look at exchange-traded funds (ETFs) that replicate indices of European banks and utilities, or products that invest in Asian emerging markets, always under the umbrella of active or passive management according to their profile.
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