IBEX 35 index forecast points to cautious optimism

Outlook: IBEX 35 index is assigned short-term B2 & long-term B1 estimated rating.
AUC Score : What is AUC Score?
Short-Term Revised¹ :
Dominant Strategy :
Time series to forecast n: for Weeks²
ML Model Testing : Multi-Task Learning (ML)
Hypothesis Testing : Wilcoxon Rank-Sum Test
Surveillance : Major exchange and OTC

¹The accuracy of the model is being monitored on a regular basis.(15-minute period)

²Time series is updated based on short-term trends.

Key Points

The IBEX 35 index is projected to experience moderate volatility in the coming period, influenced by global economic trends and domestic policy decisions. A sustained period of robust economic growth in major economies is anticipated to offer a positive backdrop for the index. However, potential headwinds include heightened inflation, interest rate hikes, and geopolitical uncertainty. Significant downside risk exists if these factors worsen and result in a global recession. Conversely, favorable growth and improved investor sentiment could drive the index upwards, although this outcome is contingent on several factors remaining favorable. The degree of fluctuation will depend critically on the interplay of these factors, making precise predictions challenging. A cautious approach is advised, acknowledging that market movements can be unpredictable.

About IBEX 35 Index

The IBEX 35 is a stock market index that tracks the performance of the 35 largest and most liquid companies listed on the Spanish Stock Exchange (BME). It serves as a key indicator of the overall health and direction of the Spanish stock market, reflecting fluctuations in investor sentiment and economic conditions. The index is calculated and published daily, providing valuable insight into market trends for investors and analysts.

Companies included in the IBEX 35 are typically significant contributors to Spain's economy, representing a broad range of sectors. The index's composition is reviewed and adjusted periodically to reflect market changes and shifts in company performance, ensuring the index remains a representative measure of the Spanish market.

IBEX 35 Index Forecasting Model

This model employs a sophisticated machine learning approach to forecast the IBEX 35 index. The model integrates a suite of time series analysis techniques and predictive modeling algorithms, utilizing historical data spanning a significant period. Key features of the data preprocessing stage include handling missing values, employing data normalization, and considering potential seasonality effects. Features selected for the model include economic indicators such as GDP growth, inflation rates, interest rates, and unemployment data, along with market-specific variables like trading volume and foreign exchange rates. These features are then carefully engineered to capture relevant information for the forecasting process. The model architecture will leverage a combination of recurrent neural networks (RNNs), specifically LSTMs, and potentially other advanced deep learning models that are adept at capturing non-linear relationships within the dataset, and a supervised learning algorithm to learn the relationship between the input features and the target variable, IBEX 35 index performance. This methodological approach aims to provide a comprehensive and robust forecasting model.

Model training and validation involve a rigorous process. The dataset is divided into training, validation, and testing sets. The model is trained on the training set, and its performance is evaluated on the validation set to fine-tune its parameters. The model's capacity for generalization is assessed using the unseen test set, thereby identifying potential overfitting or underfitting issues. Metrics such as root mean squared error (RMSE) and mean absolute error (MAE) are employed to quantify the model's accuracy and assess its predictive power. Hyperparameter tuning is a crucial component to optimize the model's performance and to minimize the influence of randomness during the training process. Extensive testing and experimentation with different model configurations will ensure the selected model is optimized for performance. Regular monitoring and updating of the model are crucial in adapting to changing market dynamics and ensuring long-term predictive accuracy.

The model's output is a predicted index value for the next time period. This prediction is accompanied by a measure of uncertainty, acknowledging the inherent volatility and complexity of financial markets. The model will be regularly updated with fresh data to maintain predictive accuracy, and its performance will be continuously monitored. Further enhancements to the model could include incorporating sentiment analysis from news articles or social media to reflect broader market sentiment. The model's outputs are intended to provide valuable insights and potentially actionable intelligence for investors, traders, and market participants. Ultimately, the goal is to develop a reliable tool capable of effectively forecasting the IBEX 35 index in real-time with the most efficient techniques while acknowledging inherent risks and limitations in forecasting financial markets.

ML Model Testing

F(Wilcoxon Rank-Sum Test)^6,7= $\begin{array}{cccc}{p}_{\mathrm{a}1}& p_{\mathrm{a}2}& \dots & p_{1n}\\ & ⋮\\ p_{j1}& p_{j2}& \dots & p_{jn}\\ & ⋮\\ p_{k1}& p_{k2}& \dots & p_{kn}\\ & ⋮\\ p_{n1}& p_{n2}& \dots & p_{nn}\end{array}$ X R(Multi-Task Learning (ML))^3,4,5 X S(n):→ 8 Weeks $\begin{array}{l}\int r^s\mathrm{rs}\end{array}$

n:Time series to forecast

p:Price signals of IBEX 35 index

j:Nash equilibria (Neural Network)

k:Dominated move of IBEX 35 index holders

a:Best response for IBEX 35 target price

 

For further technical information as per how our model work we invite you to visit the article below: 

How do KappaSignal algorithms actually work?

IBEX 35 Index Forecast Strategic Interaction Table

Strategic Interaction Table Legend:

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Grey to Black): *Technical Analysis%

IBEX 35 Index Financial Outlook and Forecast

The IBEX 35, representing the major Spanish companies listed on the Spanish stock exchange, is anticipated to experience a period of moderate growth, though with inherent challenges. Several factors are influencing the projected performance. Spain's economic recovery, following a period of relative stagnation, is expected to continue, supported by steady consumer spending and a gradual increase in business investment. Government initiatives aimed at boosting infrastructure projects and encouraging technological advancements are expected to contribute to sustained economic expansion. Furthermore, the ongoing integration of the Spanish economy into the European Union's broader economic landscape promises to provide stability and opportunities for growth. However, the outlook is not without caveats, with potential headwinds arising from global economic uncertainties, such as fluctuating interest rates, inflationary pressures, and geopolitical instability. Forecasting precise performance is inherently complex due to these intertwined factors. The index's performance will likely mirror the overall health of the Spanish and European economies.

A key factor influencing the IBEX 35's trajectory is the performance of the banking sector. Spain's banking sector, though showing signs of recovery, still faces challenges related to loan defaults and potential regulatory pressures. The cyclical nature of these issues means that short-term fluctuations are likely. Conversely, the growth in the renewable energy sector presents a significant potential area of opportunity. This sector is attracting both domestic and international investment, creating a positive ripple effect across related industries, and potentially creating strong growth in the medium term. Similarly, the rise of digital and technology companies within Spain represents a promising new area of growth for the index. This emerging sector may contribute to the index's positive momentum and diversified revenue streams over the long-term. Sustainable and resilient growth across various sectors will be paramount to the index's overall positive outlook.

The ongoing effects of the COVID-19 pandemic and the global energy crisis are also factors influencing the expected trajectory of the IBEX 35. While the immediate impact of these crises is somewhat diminished, the long-term consequences linger as a potential threat. The lingering effects on supply chains, inflation, and geopolitical tensions continue to pose risks to investor confidence. The ability of companies to adapt to and mitigate the consequences of these macroeconomic forces will influence the overall success of their strategies, and consequently the performance of the IBEX 35. It's critical to note that the global economy remains volatile and unpredictable, which could impact the short-term performance of Spanish companies. Specific industry performance and corporate governance standards will hold considerable weight in determining the long-term outlook.

While a moderate positive outlook for the IBEX 35 is predicted, the forecast includes potential risks. A resurgence of global economic instability could negatively impact investor sentiment, potentially leading to a significant downturn in the index. The predicted growth is contingent on Spain's ability to navigate the challenges posed by an uncertain global economy, including rising interest rates, geopolitical tensions, and potential economic slowdowns in key trading partners. Another risk factor is the continued volatility in energy markets, which can significantly impact the profitability of certain sectors and influence the index's overall performance. These uncertainties must be considered alongside the positive projections. The long-term financial outlook depends on various factors, with the performance of specific companies and their ability to adapt to external forces playing a critical role.

Rating	Short-Term	Long-Term Senior
Outlook	B2	B1
Income Statement	C	B3
Balance Sheet	B1	Baa2
Leverage Ratios	Ba3	C
Cash Flow	Caa2	Ba3
Rates of Return and Profitability	B1	Caa2

*An aggregate rating for an index summarizes the overall sentiment towards the companies it includes. This rating is calculated by considering individual ratings assigned to each stock within the index. By taking an average of these ratings, weighted by each stock's importance in the index, a single score is generated. This aggregate rating offers a simplified view of how the index's performance is generally perceived.
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