After the June drop: what investors did in July
While in June savers fled from stocks in Israel in panic, July tells a different story: independent retail returned to buying, mainly in the local market, but with a hand on the trigger. At the same time, one figure illustrates how much money is still waiting on the sidelines. So is this the start of a return to the market, or only a cautious pause?
After the turbulent month of June, in which the Tel Aviv exchange absorbed the sharpest drop in three years, July brought with it relative calm. According to data from the Bourse member Pair, a trading platform that concentrates the activity of independent retail clients in mutual funds, small investors returned this month to increasing exposure to Israeli stocks, albeit with the caution required after what they had been through.
To understand the picture, one needs to remember what came before. In June, the TA-35 index lost about 8.7%, the sharpest decline since October 2023, mainly against the backdrop of geopolitical tension. Investors responded accordingly and withdrew money from stock funds. In July, by contrast, a clear stabilization was recorded: the index registered only a slight fluctuation, and panic was replaced by a renewed examination of opportunities.
An examination of the Bourse member Pair for the months of April through July shows an interesting picture. Until the June declines, independent clients consistently increased net exposure to Israeli stocks and indices. June cut off the trend and turned it into redemptions, but in July money returned to flow in via net subscriptions, mainly through index-tracking funds. In actively managed funds, the return was more moderate, but the direction is the same.
It is important to pay attention to the nuance here: this is not a dramatic trend reversal, but a correction and a return to the pattern of behavior that characterized investors before the drop. In other words, many used the decline from the index’s peak levels to enter at more attractive prices, without diving headfirst.
This caution stood out especially in everything related to abroad. While the local market pulled back interest again, the consistent subscription trend that characterized index funds on foreign stocks was halted in July. The reason is likely rooted in the weakening that was recorded in the main foreign indices during the month, which led independent investors to take extra caution.
The sharpest insight comes precisely from cash funds. Some of them in total trading volume jumped sharply from 34.3% in May to about 49% in July. At the same time, the share of index funds on Israeli stocks in trading volume fell from 24.9% to only about 10.4% in that same period.
What does this mean in practice? Alongside the moderate increase in exposure to local stocks, a large part of investors chose to continue “parking” the money in cash funds, the safe track that yields steady returns in an environment of high interest rates.
The picture becomes even clearer when looking at fund trading volumes, which are declining. Part of this is due to the fact that no trading took place on Tisha B’Av, but not only. The number of traded funds also fell consecutively. It appears that the market, which is no longer as frantic as in the previous months, is still balancing cautiously, and many retail investors choose to “sit on the fence” and wait for the direction of the market to become clearer.
The bottom line of July is a good reminder that herd behavior at the peak of panic almost always comes with a high price. Anyone who sold in panic at the peak of June’s declines may have missed the stabilization that arrived immediately afterward.
On the other hand, many people’s tendency to leave a large portion of the money in cash funds and enter the market gradually reflects a balanced approach: not to avoid the market entirely, but also not to rush into it with all the capital at once. In a period of uncertainty, sometimes patience is precisely the smartest strategy.
