As global markets slump and investors wonder what to do with their portfolios, Globes asked leading figures in the capital market what they think of the situation.
Rinat Ashkenazi, chief economist at Phoenix Investments, doesn’t think we’re headed for a sharp, prolonged market slide. “I’m going to be the reassurance guy,” she says. “I think there’s been a push in the U.S. and that’s affecting us as well.”
“So why did the stock market turn bearish? Everyone was expecting a soft landing for the US economy, until last week. But at the end of last week, the employment report came out showing that unemployment in the US was up, and that fewer jobs were being created than expected. When the numbers came out, the market panicked. The fact that we are looking for a huge rally and the price-to-earnings ratios are not cheap, that doesn’t help us much.”
“We are now in a kind of initial shock wave,” says Dan Ellis, head of capital markets research at the First World Bank in Israel. “I don’t think we will move in the coming days to a situation that is more extreme than the declines we have seen so far, but rather to a kind of calming down in the markets. I think the situation that has emerged will quickly accelerate the rate cuts in the US, which is good news for the stock market.”
On the other hand, Rami Dror, managing partner and CEO of Value Advanced Investments Group, fears a perfect storm is hitting the stock market. He points out that the declines in the US (the Nasdaq fell about 5% in two sessions) come on the back of “the numbers at the end of last week showing signs of a slowdown in the US economy” and also “after Donald Trump fell in the polls in the presidential race.”
The turmoil in the Japanese economy (high interest rates) has led to a radical shift in the flow of money from Asia to the US, as well as events in the US itself, says Dror. “It’s a combination of the economic slowdown in the Far East and the US, and as a result of that slowdown, stock prices have fallen on the stock exchanges. But where will this lead us? It’s too early to tell, but it’s clear that the level of tension in the markets is high.”
In the past, there has been a correlation between economic weakness and stock market strength, says Alex Zabiejczynski, chief economist at MetaDash. “The market was pricing in economic weakness and rate cuts, expectations that boosted the market. Now we are seeing the opposite: Despite the belief that a rate cut is imminent, the decline on Wall Street has deepened. This is happening at a moment when the market is starting to fear a recession rather than slowing growth.”
What should we do with investment portfolios?
“Be patient and don’t let emotions affect your investment portfolio,” Ashkenazi advises. “Investments are for the long term. In recent years, we have been through corrections, and we don’t know how to time the market. It’s better to let the experts manage the money, or to sit back and wait, and not make radical changes.”
“The most important thing to say is that when everyone is stressed, it is better to do as little or no work as possible and let the wave pass,” Ellis adds. “Don’t buy and sell in a rush.”
At least regarding the Japanese stock market crash, Dror is somewhat optimistic. “Israeli investors are lucky that their pension funds are not invested in Asia. The percentage invested in that region is low,” he says. “Today there is a strong bias toward the US market. Israeli investment portfolios are very sensitive to the US and Israel. It should be noted that the US markets are down 5% from their peak. Beyond the immediate drama, this is nothing like what happened in Japan.”
Where are the opportunities?
Ashkenazi: “I believe in the major American indices – the Nasdaq, the S&P 500. No one knows if they will fall another 5-10%. But as long as you believe in humanity and the economy, the markets will eventually rise. After every decline, there is an opportunity. I believe that the Israeli market also embodies opportunities. With us, things are more complicated, because of the geopolitical situation. Here, too, sectors like banking and insurance are attractive, it simply depends greatly on the security situation.”
Ellis of First International believes that a US rate cut would be good news for US real estate and infrastructure, and possibly also for the defence sector. “Developments in the Middle East have a global impact in this regard,” he says. “The technology sector, which has been battered for several weeks, will continue to influence and lead going forward.”
What about the foreign exchange market?
Just two months ago, the shekel-dollar exchange rate was 3.61 shekels, on the back of speculation that the chances of reaching a deal to release the hostages were high. Since then, the rate has risen by about 6%, reaching 3.82 shekels today, in the face of tensions with Iran and fears of a wider conflict.
Financial experts are wary of forecasting trends in the foreign exchange market, which is very difficult. “Over the years, even when it wasn’t fashionable to say so, and the shekel was the strongest currency in the world, we emphasized the importance of diversifying your portfolio,” says Ellis. “You have to have a lot of exposure to currencies, not just the dollar, but also the euro and other stable economies. And we see things changing very quickly.”
This article was published in Globes, Israeli Business News – en.globes.co.il – on August 6, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.
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