Since the start of the war, the Tel Aviv Stock Exchange has risen, although there have also been days of decline. Nimrod Sapir, CEO of the Investment Houses Association, said that “first of all, it is important to remember that investing in the stock market is a long-term matter, and it is not right to judge returns in terms of days or weeks.”
What, then, is worth emphasizing?
Sapir said: “We have seen that following security successes, such as the pager operation and Operation Rising Lion, there has been a sustained decline over several months in Israel’s risk premium, and accordingly, the stock market has risen. Therefore, it is reasonable to expect that the more successfully this campaign ends, by reducing the risks facing us in the region, the more that will be reflected in a continued decline in the risk premium and a rise in the attractiveness of investing in Israel, including in the stock market.”
What should people do with their savings at a time like this?
“I believe the crises we have gone through in recent years, from coronavirus to October 7 and the latest operations, underscore the importance of maintaining savings for times of crisis. As we saw in previous crises, those who tried to time the market and thought they knew when to get out and when to get back in ended up only locking in losses. In any case, the recommendation is to consult experts before making dramatic changes to savings. At investment houses, we see that the Israeli public has matured in recent years in terms of financial conduct during crises, and we are not seeing significant shifts across the various savings products.”
When investing now, is it better to link to the consumer price index or to the dollar?
“If Operation Roaring Lion ends with significant success that includes reducing major risks that have accompanied Israel over the past 30 years from Iran and its proxies, then I estimate that, as after Operation Full Disclosure and after the pager operation, we may see another significant strengthening of the shekel. As for inflation, there is a great deal of uncertainty right now. It seemed that inflation in Israel was under control. However, the energy crisis and the impact of the wartime situation on the economy could upend that, if the operation does not end within a few weeks.”
Is there a chance that interest rates will fall soon?
“I believe that Israel’s economic conditions before the operation, inflation below the midpoint of the Bank of Israel’s target range, a strengthening shekel and the 2025 deficit coming in lower than forecasts, all supported an interest rate cut. But because of the current geopolitical uncertainty, and in light of the stance presented by the Bank of Israel in its most recent rate decision, I estimate that unless there is a rapid deterioration in the economy, the central bank will choose to wait for now before cutting rates. That said, I believe the Bank of Israel’s recent rate decisions do not take sufficient account of the impact of high interest rates on households and on small and medium-sized businesses.”
Is it better to take loans at a fixed or variable interest rate?
“I estimate that in the medium term, the Bank of Israel will be forced to cut interest rates for the reasons I mentioned above, including a strong shekel and inflation under control. In addition, as I noted, if the military campaign ends successfully, it is certainly possible to estimate a further decline in long-term government bond yields, which could also affect interest rates, since they serve as a benchmark.”