Increases of between 5% and 6% in the main stock markets predicts the Singular Bank team for the current year. They see the Ibex rising 5.6%, to 12,400 points; They give the S&P 500 a potential of 5.4%, up to 6,150 integers; and the European Stoxx 600 is 5.7% higher than now, at 540. If we add the dividend to these revaluations, the profitability of the European stock market can approach 10%.
The year will be “positive, but not as positive as 2024”, for equities, explained Roberto Scholtes, head of Strategy of the entity. The reason is none other than the expectations of central bank rate cuts (Singular foresees 2 cuts from the Fed, by half a point, and four in Europe). “This will allow yield curves to decline and bonds to revalue, which will generate quite positive returns,” he explained. Hence, the entity foresees “that 2025 will be better than last year in the best quality fixed incomethat is, for public debt and investment grade corporate bonds,” according to Scholtes.
Stock markets will end the year positively, but will undoubtedly suffer “a purely technical correction”warned the head of Strategy of the bank. “It is fundamentally an issue of competition between fixed income and equities. If long-term rates in the US really remain above 4.5%, we believe that stock market multiples, especially in the United States, are not sustainable. Something has to give way: either the curve gives way – there does not seem to be any catalysts for this – or the stock market has to correct,” he added. Hence, Singular Bank begins 2025 with a moderate underweight to equities and, within it, with a lower weight to the US.
Among the listed companies, the most attractive sector is health, he explained: “Investment ideas are the megatrends, but we are neutral on technology, because the valuations are very demanding; we see more comfortable valuations in sectors such as pharmaceuticals and health“. In this segment, he mentioned two companies: Nordisk (which they have incorporated after their last correction) and AstraZeneca. The vast majority of pharmaceutical companies, leaving aside Novo Nordisk and Eli Lilly, are trading at a valuation below the market average, with an expected profit growth of 10%. On the contrary, they see a company like Tesla as “tremendously overvalued.” The second sector to look at is infrastructure; They are invested in Ferrovial and Vinci, among others.
In Scholtes’ words, “Of the relevant stock markets in the world, the Spanish one is the one with the lowest profit growth expected to have in 2025due to our sectoral composition, with very modest profit growth in banks and insurance companies, and with great weight in electricity companies. The Spanish stock market does not benefit from the cyclical recovery that sectors such as industry, discretionary consumption or raw materials are going to have that other markets do enjoy.” For Europe, they estimate a profit increase of 7% this year, and for the Ibex 35 will be closer to 2-3% “In exchange, the advantage is that the valuations of the Spanish stock market are lower than the European average, with a PER. [multiplicador de beneficios] of 11.5 times compared to 13.5 times in the European case.” Within the Spanish stock market, he sees banks and companies as attractive. utilities integrated companies, mainly Iberdrola, despite the fact that “it has limited potential, up to 15 euros”.
Singular Bank is positioned in the Spanish banking sector through BBVA, Santander and CaixaBank. When asked about the takeover bid proposed by the first of these entities for Sabadell, “We are not assuming that the takeover will go ahead, “It is not something that we are considering as an investment opportunity in Sabadell or as something that could give an additional boost to BBVA,” he responded.
They have Inditex underweight, because it has “a double problem”: on the one hand, a “very demanding” valuation and on the other, it is the consumer company preferred by large European managers; As soon as a competitor, such as H&M, begins to do better, or Inditex itself suffers a setback, “a rotation may occur,” he warned.
Alicia Coronil Jónsson, chief economist, pointed out that “the change in the presidency of the United States puts pressure on Spain, since it is a Government of the opposite direction and internal politics is causing us to not have a clear strategy as a country to act with consensus towards the world to come”. Coronil also expressed “a certain concern about the driving force that has been the tourism sector, the demographic dividend and even public spending”; “These engines of economic growth could suffer this year if growth conditions do not finally improve in Europe,” he warned.
Regarding the most interesting assets in fixed income for this yearRoberto Scholtes pointed to investment grade corporate bonds, both in Europe and the US with the currency hedged; collateralized senior bank loan funds (which offer higher spreads than the high yield, but with less volatility); subordinated issues of banks and insurers, and high-yield bonds in Europe and short term – “the best part of the high yieldhe B.B. “European,” he said.
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