Confounding the pandemic and more recently the conflict in Ukraine, the Tel Aviv Stock Exchange has shown a stronger performance than exchanges in Europe and, to some extent, the United States.
There is no doubt that record-breaking foreign investment in Israeli start-ups has increased valuation and stock prices, but it isn’t just the tech sector that is responsible for the positive performance of the TASE. On the whole, Israel’s economy is more durable and less volatile than many other markets and may continue this trend with energy, defense, and financial sectors in Israel thriving alongside hi-tech.
Resilience Amid Global Uncertainty
With the Russian invasion of Ukraine in late February, markets worldwide were nervous. The event was unexpected and economies that were just emerging from the newest wave of COVID experienced declines, freezing economic green shoots. Although the Tel Aviv 35 and 125 indices have fallen by 3.5% each in that time, this is a more modest drop than the S&P 500 and the FTSE 100 in the UK which declined 6%, and the DAX in Germany dipped 10%.
Not only are Israeli stocks not falling as much given uncertainty over the conflict in Ukraine, but t they are starting from a position of strength; the TASE rose 20% between 2021 and 2022 compared to more modest gains or even declines in the Nasdaq, DAX, and Nikkei.
However, it should be noted that looking at Israeli compared to US stocks for a three year period, the Nasdaq rose 67% and the S&P 500 gained 49% compared to just a 35% rise in the Tel Aviv 35 index and a 40% uptick in the Tel Aviv 125 index.
It is clear looking at the trends in the past few years that Israeli stocks are strong, but from the perspective of several years, the majority of this strength was in the past year. Is this upsurge in Israeli stocks expected to continue for the next year or so, or will there be a dip soon?
Reasons to Be Bullish
There are a number of reasons to expect consistent strength of Israeli investments, particularly stocks, especially compared to other markets. Although the TASE could decline on global uncertainty, especially if the conflict in Europe continues or escalates, the fact the index has not declined nearly as much as those in Europe points to the likelihood of continued strength.
In addition, the conflict in Ukraine may have a positive effect on energy stocks as Israel finds ways to export its natural gas resources and Europe is looking for alternatives to Russian fuel.
Meitav Dash chief economist Alex Zabezhinsky told Globes that one reason Israel’s economy may have had a particularly robust upturn since the beginning of 2021 was the fact that the country created a viable government after several years of repeated elections and stalemates. A functioning government may have fueled confidence among foreign investors, who bought a record $4 billion in TASE stocks.
Zebezhinsky also notes that the Israeli government is reforming the way it issues pension funds and “will switch money released from investment in certain bonds to equities in Israel. This is a matter of several billions of shekels a year, every year.”
IBI Investment House chief economist Rafi Gozlan told Globes that even though the tech sector is given most of the credit for Israel’s economic growth, other sectors, such as finance, defense, and energy, are also performing well and adding value to Israel’s economy. The fact that these other sectors are less volatile contributes to economic stability and as the Bank of Israel moves towards raising rates to rein in inflation, financial stocks will benefit.
Invest in Israel’s Economy
Israel’s economy has been strong for the last few years, but this is not just a temporary trend. Given the continuation of strength in tech along with other sectors such as finance, defense, and energy. Now is the best time to invest in Israel. Be a part of Israel’s long-term tech growth with solid Israeli investments. The Jerusalem Portfolio, which is comprised of ETFs, is an Israeli investment with a comprehensive focus on Israel’s economic growth.
About the Jerusalem Portfolio
The Jerusalem Portfolio is comprised of a fractional interest in 100 Israeli companies through a portfolio of professionally managed ETFs. The recipient will be given a plaque with a beautiful and customized image of Jerusalem. Talk to our experts today about buying TJP for yourself or giving the Jerusalem Portfolio to a special young person as a bar or bat mitzvah gift, birthday, graduation, or other occasions.