News

Twelve Valencian financiers give their points of view on the Spanish stock market for 2021

VALENCIA. Once again this year, this newspaper has knocked on the doors of twelve reputable financiers from the Valencian Community to find out how they expect the Spanish stock market to behave in 2021. By doing so we are able to provide readers of Valencia Plaza with a wider variety of expert opinions, especially in these times of uncertainty caused by the ‘coronavirus effect’, which hit the financial markets hard in 2020.

Hereinafter are the opinions of this group of professionals, who answered our questions a few days before finding out about the agreement between the European Union and the United Kingdom on Brexit, which was reached on New Year’s Eve. In other words: it is an obstacle less –with regard to the definitive conclusion of the ‘soft Brexit’, to be dealt with by financial markets, which like everyone else trust in the effectiveness of vaccines that have already started to be administered.

Francisco Varea, a founding member of Edetania Patrimonios

-How do you expect the Spanish stock market to behave in 2021?
 -As we have already said on previous occasions, we don’t think that the Spanish market offers the best risk-return binomial. The Spanish investor tends to invest in national companies because they know more about them. However, given the impact of the pandemic on the Spanish economy –which is already very weak, it might be worth trying to internationalize our equity portfolio, in such a way that, without compromising profitability, its volatility can be reduced. Having said that it is likely that the behaviour of the Spanish stock market improves in a few weeks, as it benefits from the feel-good investment favoured by the release of the vaccines and the measures taken by the central banks. Nevertheless, little by little, and as the negative economic data of the fourth quarter, which is the result of the second wave of the virus, is confirmed, along with the possible third wave after the Christmas holidays, the volatility could resurface. After this possible increase in volatility, which might occur in the first quarter of the year, the sideways market could remain within a tight range until there is mass immunization of the population, and this might happen between the end of the second and the beginning of the third quarter, according to when the virus is actually brought under control.

– What closing levels of the IBEX 35 are expected in 2021?
 -If the aforesaid scenario comes true, the markets will behave the best in the second quarter of 2021. So it is likely that the Ibex 35 tries to reach 9000/9500 points during the year.

-What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -As the immunization becomes reality, all the sectors that are associated with the cycle the most and are the most affected by the pandemic should be the ones that lead the recovery. Therefore, companies like IAG, Aena, Amadeus, Repsol, ACS or Acerinox might be able to recover well. Companies that might benefit from the energy transition –and the structural change involved in the ever-increasing standards of sustainability shouldn’t be forgotten either, such as in the case of Iberdrola. The financial sector is the big question. Apart from the specific fluctuations caused by the corporate movements that must continue to be produced –until the economy starts to show a real and sustainable improvement, it is a sector that will continue to be under pressure, because to be able to confirm a turnaround in its behaviour an upturn in the key variable of its income statement will be necessary: the interest rates. In any case, as explained, we think that the success in 2021 will be very fast when it comes to interpreting data and knowing how to position oneself at all times among defensive and cyclical companies, because they could produce significant sector-based rotation; starting with the first part of the year when the macro confirms the economic weakness to –in view of the second half of 2021, return to the growth as the immunization is actually achieved.

Javier Lorenzo, the founder of the Jlorenzotrading.com school

-How do you expect the Spanish stock market to behave in 2021?
 -Given the current situation of the monetary policies of the central banks, and the fact that the interest rates are so low, the fixed income is not very attractive and in my opinion hopefully the money will continue going to the variable income. Therefore, although I doubt that we are going to continue on in the same way as in 2020 (from March onwards) and there will certainly be some sort of scare along the way, I think that it is worth keeping to the variable income option. The specific problem that the Ibex 35 might have is that the sectors that are the strongest at the moment, such as renewable energy, technology, automobile do not have enough weighting in the selective Spanish index and consequently, it might be difficult for it to keep up to the pace of other indices.

– What closing levels of the IBEX 35 are expected in 2021?
 – This question is definitely impossible to answer. I wish we had a crystal ball and we didn’t have to worry about our investment! If I had to bet on it I would say in the 8500-8600 range.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -As I said in the first question, the strongest sectors in Europe at the moment, relatively speaking, are the renewable energy, hardware technology, especially the semiconductor or the metallurgical industries. Personally I always try and have strong stocks from strong sectors in the portfolio, which are trending upward without any restrictions. So if I had to choose my favourites from the Ibex 35 at the moment they would be Solaria, Siemens Gamesa and ArcelorMittal.  I would stay away from the sought-after fixed-line telecommunications, food producers or pharmaceutical companies, which are now relatively weaker sectors in Europe and therefore I prefer not to have them in the investment portfolio. Sectors with weighting in the Ibex 35 such as banking or electricity distribution companies that are midway in the index table with regard to relative strength and the improvement of these sectors would help improve the performance of the Ibex 35 in 2021.

Alejandro Martínez, the cofounder of EFE & ENE Multifamily Office

-How do you expect the Spanish stock market to behave in 2021?
 -We know exactly what the Spanish stock market will do in 2021. The rest too: they will fluctuate. Apart from that, we are not trying to guess what will happen, seeing as year after year the markets usually laugh at the forecasts. Our approach is based on having clear-cut criteria to adapt the portfolios to the events; an approach that is more like that of a businessman who has to deal with a changing market. We base ourselves on a universe of varied and global assets to adapt the portfolios to what the market repays, generally against strategists and analysts. The adaptation guarantees our survival and if you don’t survive you don’t succeed.

– What closing levels of the IBEX 35 are expected in 2021?
 -The first thing to remember is that the Ibex 35 is moved from abroad. More than half the trading volume comes from abroad, and the transaction tax will reduce it. The second thing is that it is an index that is highly concentrated in just a few companies. Therefore, what the sectors, which these companies belong to; do will determine what happens with the Ibex 35. We have seen a clear shift in the international markets from growing companies to listed companies. The growing companies have been represented by the big American technology companies, while the rest of the world has done precious little. The listed companies –in particular those from the energy sector, were at record 1931 low levels compared to the rest. With the announcement of the vaccine and overlooking all the uncertainty, the market has gone from black to white: in Spain this means that the banks and petroleum companies have skyrocketed lately, thus mitigating part of the punishment of 2020. For 2021 we don’t think that the banks will have too many reasons to grow, seeing as they have minimum margins and very strict regulations. The petroleum companies and all the sectors associated with their environment (engineering, transport…) are so cheap that we doubt that they will see new minimums, so we would be a bit more optimistic. But we insist: we have to adapt to the market, because the market will not adapt to our analysis.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -As cyclical stocks I think that we would all agree: the sectors that have been affected the most by the post-covid measures might be the ones that are the most successful in the future. It is exactly in the crisis where investing can be safer, because the safety net is bigger. In this regard we have cyclical stocks such as IAG, hospitality such as the Melià or engineering such as Técnicas Reunidas. And if we omit the year, quality companies that should not be left out of the portfolio include Grifols, with all the aspects of a good investment including a reasonable price. When it comes to dividend investing we have good payers such as the electricity distribution companies, the dealerships and the petroleum companies, responding to the demands of the moment. Apart from that, we would continue to stay out of the Spanish banks for now.

Antonio Jiménez, the director of GVC Gaesco in the Valencian Community

-How do you expect the Spanish stock market to behave in 2021?
 Positive. We think that 2020 was a rough patch and that the coordinates that influence the market are positive: corporate profits are rising, attractive valuations in many sectors, risk free return alternatives and high liquidity.

– What closing levels of the IBEX 35 are expected in 2021?
 -We expect a growth of 15% in the Spanish stock market index, up to 9200 points in the next few months.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -The businesses with strong foundations will be consolidated, but the main upward vectors in 2021 will be those that are associated with the speeding up of the digital transformation (fintech, healthtech, 5G) and those related to the new revolution of the energy transition (hydrogen, renewable energy, client centric, greentech). Moreover, the valuable opportunities arising from the market crash are also interesting, the stories of corporate or sector restructuring, the dividend yield as a replacement for the fixed-income and the companies that comply the best with the ESG criteria. We would keep a lower weighting in the defensive sectors such as food, traditional electric power, telecommunications and banks, seeing as we will be selective in these two sectors.

Pilar Lloret, the general manager of Nao SAM

– How do you expect the Spanish stock market to behave in 2021?
 -As we always say, it is impossible to guess one year ahead where the indices will be or what the stock markets are going to do, because the short-term is always influenced more by the stir caused by the daily news (whether it is relevant or not for the long-term) than due to the financial position and the business of a company.

– What closing levels of the IBEX 35 are expected in 2021?
 -I have just answered that in the previous point.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -We would stay away from the banks where we still don’t see an increase in the organic growth possible (due to the low interest rates) and, in addition to having regulatory risk, we have political risk. These companies are limited when it comes to paying dividends and they are at the mercy of what the ECB tells them to do. We don’t like the telecommunications companies either, where it is very difficult to see the long-awaited consolidation that would favour having a greater pricing power, and where considerable investment is undertaken. The revenue does not improve, the expenses and the investment exert upward pressure… it is the opposite of what we want. The companies that we like for their healthy and competitive business include Amadeus, Grifols and Vidrala. Nevertheless in the first company mentioned, we would expect a certain correction and we would keep away from the second company for the time being due to the high level of debt, we would need more correction to invest in it. Enagás is also a good option, calm, with a high dividend and with an income statement that never gives you any surprises. As for Inditex (we love this company), despite the results of this year, which have been marred by the pandemic and the closure of shops, the business continues to be in perfect condition. Furthermore what has happened has strengthened it and it has conveyed the quality of its online channel option in the last few years. The latest results show that the company continues to improve margins; it has a sound and healthy balance sheet, with a strong cash flow, which it will have to share out one day.

Sergio Serrano, the general manager of Gesem AV

– How do you expect the Spanish stock market to behave in 2021?
 -We hope that after many years with a clearly negative performance of the main Spanish index relatively speaking, given the initial low levels, 2021 might be a good year for the Spanish stock market. Sectors that have a big weighting on the index such as the financial or tourism sectors, which have lagged behind in the recovery of the stock markets after being hit very hard by the consequences of covid-19, with the progress made in the vaccine, they must turn this situation around in 2021.

– What closing levels of the IBEX 35 are expected in 2021?
 -With the enormous amount of uncertainty that we will have to deal with in the next few months we would not dare to comment on the closing level for 2021, but given the composition of the index, the behaviour should be very good as long as the fight against covid-19 doesn’t fail. Companies that traditionally were very solvent, with an obviously conservative profile, given the consistency of their results, such as Aena, Amadeus or Ferrovial, which have been significantly affected by the consequences of coronavirus, we hope that this is substantially reversed in 2021. Then, the index bias has changed with the new incorporations of sectors that have gained weighting, which we think will do well in the next few years such as those from the renewable energy sector (Gamesa, Acciona, Solaria and Iberdrola) or the pharmaceutical sector (Grifols, Pharma Mar and Almirall). This will favour a better performance of the main Spanish index, which has traditionally been closely related to the financial sector and the old economy (utilities, telecommunications and energy). Although we don’t like the financial sector very much, it might give us a positive surprise as well, considering the low levels that it has started off with and it might be spurred on by new corporate transactions.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -The bias for 2021 would be for more cyclical sectors and those that have been hit the hardest by covid-19. Also those that can benefit from the investment from the European fund aimed at mitigating the consequences of the coronavirus. Within the Ibex 35 we like stocks such as IAG, Inditex, ACS and Iberdrola a lot for 2021.

José Gregori, the director of Welzia Management in Valencia

– How do you expect the Spanish stock market to behave in 2021?

 -The behaviour of the Spanish stock market will be closely related to the evolution of coronavirus. Our economy has been one of the hardest hit by this pandemic, given its composition, in which tourism for example is very important. In view of the information that we have at the moment, we do not know when covid-19 is going to be brought under control, but it seems that in 2021 it might get worse, it might be a year of recovery with substantial economic growth, corporate profits… Part of these expectations for improvements has already been included in the financial quotations. We should see a calmer year than 2020 with increases closely linked to the improvement of the economy, but we will have to stay alert just in case the evolution slows down at any time.

– What closing levels of the IBEX 35 are expected in 2021?
 -If the evolution of the pandemic is good, which in our opinion depends to a great extent of whether the immunization schedules are fulfilled, we might see significant improvements in the sectors that have suffered more such as hospitality, travel, textile industries… The inertia since the announcement of the vaccine could lead us to think that the movements like the one of last November –where the Ibex 35 increased by 25%, might be repeated; but we must not forget many other variables that might affect it such as the evolution of Latin America where many Ibex 35 companies have interests, the lack of technological stocks and the regulations.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -With regard to the recovery and returning to normality, once herd immunity is attained, the sectors that have the brightest future are those that have already been mentioned. Those that are related to tourism –such as the airlines, and the discretionary consumption among others. At the same time there are trends that are working very well and they will probably continue to do so in 2021, such as for example the companies involved in digitization and the 5G, renewable energy and those that are in charge of network security. You still have to be careful, although at specific times they might evolve well, in sectors such as the petroleum, media/television and banking sectors; each one for different reasons but mainly regulatory and changes in the consumer preferences.

Mónica Blesa, the director of private banking of Caixa Popular

– How do you expect the Spanish stock market to behave in 2021? 
-After such an unusual year like 2020, with the market behaviour strongly influenced by the economic consequences of the pandemic, it is likely that the volatility continues in 2021, even though the trend is positive according to how the immunization of the population progresses and the possible outbreaks of covid-19. The Spanish stock market is one of the markets that have been hit the hardest and its recovery is taking longer than other countries. We think that the first six months will be neutral, but with a slight increase, whereas if everything evolves favourably, it will be the second half of the year when we will see a more positive behaviour.

– What closing levels of the IBEX 35 are expected in 2021?
 -We do not manage levels and especially in a year like the next one. Moreover, the evolution of the Ibex 35 basically depends on the evolution of five companies (Iberdrola, Inditex, Santander, Cellnex and Amadeus), which at closing in September had a weighting of more than 50%. Each one from a sector, their performance might be very different according to how the events unfold (covid-19, Brexit, legislative changes, defaulting when the grace periods of the ICO loans end…). We do think that the news at the moment is positive, the different vaccines have contributed significantly to triggering off the recovery –not only that of the Ibex 35, but also that of the markets in general, and the start of the immunization of the population seems to imply that we are on the right track towards solving the pandemic (in a shorter amount of time than what was expected initially), which will support the market. However, this process is not going to be free of uncertainty or contingencies, which might result in corrections being made in the market, which we think is positive because it means that the levels reached can be gradually consolidated.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -So far, and in general, the growth stock has behaved better than those related more to the economic cycle. That is exactly why we think that although this isn’t the time for radical changes, it is a good idea to start incorporating this type of stock in the portfolios –carefully, although they have fallen the furthest behind in the recovery, to be able to make the most of their success. Then again, the sectors that have been most affected by the restrictions imposed due to the covid-19 (tourism, airlines…) are going to take longer to recover and although the current prices might seem to be attractive, we will stay away from them for the time being. The immunization will take some time and the restrictions will continue, according to the health experts, until 70% of the population has been immunized and herd immunity has been attained. So, we would wait before investing in this type of stock until we really see a positive evolution in their business results.

Javier Gómez, the director of Andbank in Valencia

– How do you expect the Spanish stock market to behave in 2021? 
-The special composition of the benchmark index means that the Spanish market is not one of our favourites. That does not mean that it is not going to have a positive performance potential. In our opinion, the profits associated with the selective might recover in relation to the depressed 2020 by more than 85% in 2021 and then in a more normal way in 2022. It has to be pointed out that with the environment still being so uncertain, the important thing will be to focus on finding the solutions for the pandemic related to the immunization. This is so because the cyclical component of our economy –and its association with sectors such as the tourism or automobile sector, continue to have a negative scenario. If things get back to normal in time, the results could be better. If, on the other hand, the confinement continues and the vaccines do not arrive or they are not so effective, the behaviour might be worse. Therefore, we must be very tactical with regard to the weighting of the Spanish equity securities in our portfolios.

– What closing levels of the IBEX 35 are expected in 2021?
 -We estimate 4% above the current levels; but it will be the performance of the corporate profits that will determine the behaviour in the end. The underlying volatility is still high and that is the result of the uncertainty related to the behaviour of the economy. The good news is that we know what the minimum is and, especially, that the measures taken to deal with the minimums of March this year are still being implemented. More incentives will probably be added as well. Therefore, there will be volatility, but we are constructive with the index.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -Once again it is a question that has a different answer according to the economic time and, in particular, the performance of the vaccines. In general, we think that with the vaccine and the recovery of the more cyclical stocks, which will behave better than those with a more defensive bias (associated with the bond evolution, for example) or those that have worked very well during the worst moments of the pandemic. The markets’ appetite for risk has to be determined. If the economy gets back into certain pre-pandemic habits and a steady, broad based economic recovery is perceived –both in Spain and in the rest of Europe, then our portfolios should rotate towards the cyclical. Otherwise, we will have to position ourselves on more defensive and quality stocks. One very special case is that of the banks. Our outlook for them is rather opportunist: the environment still doesn’t favour the returns of this industry, although elements such as the authorisation of the payment of dividends or announcements about corporate transactions could be considered to be positive.

Amparo Belenguer, the director of Ibercaja Patrimonios in Levante

– How do you expect the Spanish stock market to behave in 2021?
 -If the rotation towards companies that are more associated with the cyclical is consolidated, in this scenario, the behaviour of the Spanish market, given its composition, would have to be positive. The positive behaviour would be endorsed by better expectations for the growth of the GDP, as well as positive news about covid-19.

– What closing levels of the IBEX 35 are expected in 2021?
 -With regard to the closure this year at the current levels, the 8000 points would be a hindrance more than a support. Normally at this time big movements are not seen because usually there are no big capital flows from institutional investors. This idea of 8.000 points would continue as long as no events, like the new strain of the virus or the negative news about the outcome of Brexit, occur suddenly, like they have done in the last few days.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -Our management and consultancy model is based on a global market, in which we invest in growth industries and quality well-priced companies; a model based on both the diversification and the control of the risk. For years, we have focused on the so-called megatrends of the market, such as technology, demography, global consumption and health, subject matters that are disassociated in specific ways and they give the portfolios consistency and strength.

Javier Navarro, the managing partner of Vinca Capital

– How do you expect the Spanish stock market to behave in 2021?
-We expect an overall growth of 6% in terms of the GDP, so we are positive about the evolution of the financial markets for 2021. For the Spanish economy we expect a growth of 7.5%, supported by the arrival of 140,000 million euros in European aid during the year. Our main concern is the level of public debt, which is going to be 124% with regard to the GDP.

– What closing levels of the IBEX 35 are expected in 2021?
 -We think that the Ibex 35 might revalue between 15% and 20%, positioning itself at approximately 9500 points at the end of 2021.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -There is a rotation of the ‘growth’ stock towards the ‘value’ stock; the latter has been hit harder by covid-19. However, we think that positions have to be held in both styles to have a diversified portfolio. The most attractive sectors include energy, electricity, pharmaceutical and technology where some good ideas might be Elecnor, Indra, Iberdrola and Faes Farma. We are more sceptical in the real estate sector where we expect a drop in the price of property; and banking due to the increase in defaulting in a scenario of low interest rates. On an international level, we think that there has to be more exposure to Asian markets.

Jorge Pérez, the director of Investments of Libertas 7

– How do you expect the Spanish stock market to behave in 2021?
-A rather erratic behaviour, subject to the news about the evolution of the pandemic, the immunization of the population, the new outbreaks and the impact of all this on the economy. Predictably without such pronounced corrections as those that we suffered in March 2020 but with substantial volatility at times.

– What closing levels of the IBEX 35 are expected in 2021?
 -In my opinion the market quotations are distorting the real value of the assets increasingly more, due to the massive injections of cash and an interest rate structure that does not give priority to the risk or the duration in a rational manner. Not even the biggest and fastest drop in the GDP that we have had in the West in decades has stopped some of the indices reaching record highs again or close to them. The need to take on more risks to get the same returns and the lack of investment alternatives makes the trading multiples of equities rocket. As the corporate profits recover in 2021, maintaining the existing multiples should result in a type of bull market trend in 2021, with a high level of uncertainty.

– What sectors/stocks do you think are going to have a successful future and which ones would you stay away from?
 -There are sectors that have a growing structural demand such as technology, renewable energy, health or food, although it is not that easy to find valuation opportunities in them. In contrast, other sectors like the financial sector, automobile or the hospitality are going through a cyclical cycle without any signs of significant improvement in 2021, but in some cases they have attractive valuations. I am concerned about the banking sector in the next 2 years, with zero interest rate (or negative) policies that have come to stay, larger capital demands, an excess of installed capacity and a foreseeable increase in defaulting once the business stimulus plans start to be removed.