When we hear that Ibex 35 has lost points or has closed above a certain figure, it is often not clear what exactly that measure represents. What does it mean that the index is located at 12,300 points? What does it imply for investors or for the market state?
The points: a reference, not an amount of money
Actually, the stock market points do not translate directly into euros or shares. They are a reference value that indicates the evolution of a stock market index, such as IBEX 35. Each point reflects a proportional part of the average variation of the actions that make up said index. Thus, when it is said that the IBEX has risen or lowered 100 points, the global behavior of the companies that are part of the index is being summarized, not a direct monetary change.
This system allows clearly to observe whether the general trend of the market is positive or negative, also facilitating the comparison between different periods of time or indices from different countries.
The IBEX 35: Of the 3,000 points to the current sway
The IBEX 35, the main reference index of the Spanish Stock Exchange, began to count on a base value of 3,000 points on December 29, 1989. Since then, its trajectory has reflected key historical moments: in December 2007 it came to touch the 16,000 points, just before the outbreak of the financial crisis. In mid -2012, in full debt crisis in the Eurozone, it descended up to 6,552 points. And during the Covid-19 pandemic, he lost more than 3,400 points in just a few weeks.
Currently, the index struggles to recover levels prior to recent volatility, marked by factors such as geopolitical uncertainty, global commercial policy or monetary decisions of central banks.
How the points of a stock market index are calculated
Indices can be built in different ways. In the case of Ibex 35, a model weighted by stock market. This means that companies with the highest stock market size (price of action multiplied by the number of quoted shares) have more influence on the evolution of the index.
To calculate the points of the Ibex, a mathematical formula that includes the price of the shares, the number of titles in circulation and other factors such as dividends or capital extensions are used. All this is periodically adjusted to reflect the real behavior of the market in the most faithful way.
Important: having more points does not imply that an index is better or larger than another. The relevant is its evolution from its initial value.
Other indices, other methods
Each stock index has its own methodology. For example, Eurostoxx 50, which brings together the 50 main companies in the euro zone, does not value liquidity such as IBEX, but the total stockbroker of the companies and the sectorial balance within the index.
This implies that each index reflects a different vision of the market, according to the criteria with which it has been designed. Therefore, comparing points between different indices is not useful if you do not take into account how they have been built.
Why are investors important points?
In addition to offering an overview of market behavior, the points of the indices allow investors to replicate investment strategies. For example, portfolios can be built that imitates the performance of Ibex 35 or invest through indexed funds that follow their evolution. Thus, the points act as a compass to make investment decisions, both for individuals and professionals.
In summary, understanding what are the points in the stock market is key to interpreting financial news. They are not arbitrary figures or absolute values, but references that indicate whether the market advances or goes back, and that help measure the economic pulse of a country or a region.