Avner Hadad: "There is a significant chance that the dollar will drop to 2.5 shekels in the coming year"

The Israeli market, which for a long time presented a higher yield than most stock exchanges in the world, is faltering. In a letter sent to investors, Avner Hadad, CEO of Phoenix Investment House and co-CEO of the KSM funds company, analyzes the reasons for the gap that has opened up and explains what he believes could change the picture.

"In the last three months, the leading indices in Israel have suffered from an underperformance of about 20% compared to the market in the USA. The weakness in Israel stems not only from the correction after increases of over 100% in the last two and a half years in the local indices, but also from other reasons, including diplomatic, political, and security uncertainty (open fronts). These reasons also influenced the motivation of investors to continue injecting money into the local market, and indeed these flows have decreased," explains Hadad.

According to him, the turning point may be the general elections this coming October: "Uncertainty and stress create opportunities. As happened in a number of election campaigns in the past, this time too the turning point could be the approaching elections, the results of which may positively influence the local market and reduce the risks and uncertainty currently clouding it."

According to his assessment, as the coming months pass, we will see a renewed recovery in the local stock market. "It can be expected that the general positive trend of the market in Israel will continue and even strengthen significantly towards the elections and the fourth quarter of 2026," he wrote.

The low is still ahead

Hadad also provided a forecast for the foreign exchange market.

After the dollar plunged in May-June to a low of 2.8 shekels, it recorded a slight recovery and has been trading recently around 3 shekels. Despite this, these are still low levels we have not seen since the 90s. According to Hadad's assessment, the low is still ahead:

"Regarding the dollar, there is a significant chance that we will see it during the coming year drop to the range of 2.5-2.6 shekels, as a result of the decrease in uncertainty expected in the coming months in the local market. It is doubtful that intervention by the Bank of Israel will help."

Hadad concludes the letter with: "Of course, this is only my personal opinion. In the meantime, we promised a volatile year and we delivered. We will talk about 2027 later."