Two investment houses surprised with a weak month in provident funds: "The market is not cheap, but it is not in a bubble"
Despite negative returns in July following sell-offs in semiconductor stocks, the performance of local entities since the beginning of the year remains strong. Foreign currency exposure pushed Yelin Lapidot and Altshuler Shaham to the top in July. Clal and Harel are at the bottom. The forecast: "Volatility is high, and the ping-pong will continue."
July is the second consecutive month in which savers in provident funds have seen negative returns. In the general track, a decline of 0.5% was recorded despite a positive return in the Tel Aviv indices, but since the beginning of the year, the return in this track is still strong and stands at 5.4%. So, at least for now, the current year is also very positive for savers.
In the equity tracks, savers saw a sharper monthly decline of almost 1% on average, but they also enjoy a very nice return of 8.7% since the beginning of the year.
One that stood out for the better last month is the track that mimics the American S&P 500 index, which concludes July with a rise of 2.2%, even though the index itself recorded a decline of 0.8%. The reason is the jump of the dollar against the shekel by 3.2%. Since the beginning of the year, the track still provides an underperformance of 4.6% (relative to the general).
Yelin Lapidot leads in the general
The entity that jumped from the bottom of the table to the top in July is Yelin Lapidot. Alongside Altshuler Shaham, the investment house has been at the bottom of the return tables for the last two years, following high exposure to abroad relative to competitors while the market in Israel soared.
But in recent months, the market in Tel Aviv has been "treading water," and this helped Yelin Lapidot climb up, precisely thanks to the dollar exposure.
Thus, it took first place in the general track with a balanced return of 0%. It is followed by the investment house Meitav in second place with a decline of 0.1%, and then the insurance company Phoenix with a decline of 0.2% and Menora Mivtachim with a minus 0.3%.
Those who finished last month at the bottom are the insurance company Harel with a decline of 1.2%. With a large gap above it is Clal with a decline of 0.7% and Infinity with a minus 0.55%. However, since the beginning of the year, Clal is still first with a return of 6.8%, followed by Meitav with 5.9% and then Harel with 5.8%.
Since the beginning of the year, Meitav is third from the end with a return of 5.1%, below it is Altshuler Shaham with 4.4% and Yelin Lapidot in last place with 4.2%.
Oren Montal, manager of the members' money investment division at Menora Mivtachim, notes that what stood out last month was a very strong realization in semiconductor stocks, a sector that stood out since the beginning of the year and led the rises, but corrected very strongly in July (Nasdaq index fell by 4.2%). "The main reason our returns were relatively reasonable is that while we do hold a respectable position in semiconductors, it is more in large companies that fell less this month."
Altshuler Shaham in the equity track
In the equity track in training funds, Altshuler Shaham took first place in July with a decline of 0.28%, followed by Meitav with minus 0.34%. Here Yelin Lapidot is in third place with a decline of 0.4%. Also in this track at the bottom is Harel with a sharp decline of 2.1%, and above it Clal with a decline of 1.5% and Analyst with minus 1.4%.
Since the beginning of the year in the equity track, Clal stands out with a rise of 11.3%, followed by Meitav which rose 10.4% and Harel with 9.9%. At the bottom are Altshuler Shaham and Yelin Lapidot with a return of 6.7% and 7.2%.
Lea Preminger, VP of Investments at Altshuler Shaham, also notes the sharp decline in semiconductor stocks in July, when "for us, in Israel, it worked that bank stocks rose sharply and contributed to the portfolio's return here, and it was very significant. In the foreign part, the excess holding in energy stocks that rose by a double-digit rate worked for us. The foreign currency also helped us. When the shekel strengthened to 2.8 shekels, we lowered the hedges a bit, and actually increased the exposure, and therefore the strengthening of the dollar also worked in our favor."
In pension funds for those aged 50 and under in July, the return is negative at an average rate of 0.2%, and since the beginning of the year, the average return is 7%. In July, Meitav is first with a positive return of 0.65%, followed by Phoenix with a rise of 0.2% and Migdal with 0.1%. At the bottom are Harel with minus 1% and Infinity with minus 1.2%. Since the beginning of the year, Meitav is first in pension with a return of 9.6%, followed by Clal with 8.3% and Harel with 7.4%. At the bottom are Infinity with 6.1% and Altshuler Shaham with 5.5%.
Eran Klinsky, VP of Investments at Meitav Gemel and Pension, notes that "we are very diversified. The right choice of stocks and bonds worked for us in July. There wasn't one specific thing but many pieces of the puzzle that fell into place, and this is also true for the principles of investment themselves, for diversification at the geographic and sectoral level. All the things that are considered clichés and 'boring'."
"The waters are very stormy"
Looking ahead, Preminger estimates that one should "maintain an overweight in both semiconductor stocks and banks, and also hold bonds with a long duration both in Israel and abroad, there is still potential for capital gains there. What is most important for the period now is diversification. Every other month there is another engine that 'pulls' and generates the return."
Klinsky from Meitav estimates that the volatility in the markets will continue. According to him, "the waters are very stormy now. One day there is a Trump agreement with Iran and then the next day a war. This ping-pong makes the markets volatile at the level of every day and certainly at the level of months." He suggests maintaining now "a correct balance between Israel and abroad, including the USA but also Europe, emerging markets and Japan."
"The ratio between Israel and abroad should now be 35%-40% for Israel and the rest for abroad. In Israel, there are elections on the horizon and the whole geopolitical issue can also heat up, and on the other hand, an agreement can suddenly arrive. That is, the various arenas are open to one degree or another and this creates volatility and will continue to accompany us forward."
However, he estimates that the markets are not expensive now. According to him, "Israel was cheap and now it is already less cheap. Price-to-earnings ratios of 20 in the flagship indices of Tel Aviv and Wall Street is not cheap but reasonable, it is not a bubble market. There are cheaper sectors like banks and on the other hand more expensive ones like green energy."
Montal from Menora adds that "since the beginning of the year we have gradually reduced exposure to Israel because the pricing was relatively high and a very large gap developed and we thought that markets abroad were more interesting. At this point in time, following the correction that was here in June and the rises abroad, we are neutral between the markets in Israel and abroad."
