Investment manager who claims: this is the figure that signals when to buy or sell stocks in Tel Aviv
Erez Koptsh, head of Israel stocks at the insurance company Hachshara, is sure that the capital market is missing the fact that the US is facing deflation and therefore its interest rate will fall. He suggests extending duration in bonds and provides a recommendation on three sectors that are trading at attractive valuations in Tel Aviv.
Erez Koptsh has always moved around in places where money played a role, and this affected him deeply. “I grew up in a contractors’ home and saw how wealth is built with ten fingers,” he says. “Alongside that, I always loved creating connections. In the army I dealt with security investigations and further developed my abilities for conversation, investigation, and connecting with people.”
His start in the capital market was as an M&A analyst at the Giza Singer Even firm. Later he moved to Discount Bank, where he worked for 20 years as a stocks analyst and chief strategist. Half a year ago he joined the insurance company Hachshara, in the role of investment manager and in charge of the stocks field in Israel.
The global economy, and in particular the US, is currently dealing with “sticky” services inflation that refuses to subside, but according to Koptsh it is only temporary. Added to this are the implications of the war in Iran on oil prices, which keep reaching the 90s and even 100 dollars per barrel.
These things have a direct impact on the process of lowering the interest rate in the US, which appears to have stalled. In Koptsh’s view, all of this is in fact temporary, and within half a year the picture will flip: “The market is missing that what we have now is temporary inflation, and what we are expected to see next is in fact deflation, which will support lowering the interest rate,” he believes. “We are now in the last part of the interest-rate increase and the high yields in the bond market.”
The explanation, according to his approach, stems from the fact that there are two scenarios regarding the AI revolution, and both will lead to the same outcome of deflation. “Right now you don’t see it because of the Strait of Hormuz and the impact on oil, but around the corner there are two possibilities: one is that what happened in 2000 will happen again—when at first the market flew, valuations inflated, and CAPEX increased—then a crisis arrived that took years to recover from. The second possibility is on the optimistic side: the AI will lead to efficiency and layoffs, which also create deflation. If we map the risks, there is an 80% chance we will reach deflation.”
Koptsh draws from this a practical piece of advice: “If I’m talking about managing duration, I think you should take advantage every time that bond yields rise a little and extend the duration,” he says, “so that later, about half a year from now, when yields fall, there will be a bigger lever for capital gains.”
The winning tip: look at trading cycles
Against the backdrop of the sharp rises on the local exchange over the past two years, Koptsh says that “we also identify a real possibility for a better security future that will bring calm and strong growth. At the same time, over the long term, it is precisely the US market that historically shows the best performance and serves as a global benchmark.”
Koptsh mentions that the Israeli market is small: “The aggregate market value of all Tel Aviv 125 stocks is about NIS 1.74 trillion. For comparison, Apple’s market value is $4.8 trillion. Therefore, it’s worth looking at extreme points in changes in trading cycles. If you saw a stock rising in an exponential way and suddenly there is an unusual trading volume, that is a sign of concern, especially in a market that is less liquid like Israel. The same applies to declines: if after many months of declines in a stock you suddenly see an unusual trading volume, it could be that the bottom has been reached.”
Bonds are providing a nice yield right now
Koptsh suggests a general portfolio for investors, suitable for a 5–7 year horizon, where stock exposure is approaching 50%. The structure includes 27% in US stocks, 17% in Israel, 2% in Europe, and 1% elsewhere. He also allocates 21% to Israeli government bonds (duration 6–6.5 years), 13% to corporate bonds, 15% to alternative assets (real estate, infrastructure, and hedge funds), and 4% in cash.
“When interest rates were zero, it made sense to increase exposure to stocks. Today, when interest rates are ‘meaty’ and bonds provide a nice ongoing yield of about 5%, it is preferable to keep both a safety cushion and liquidity,” he says.
Recommended sectors
Koptsh indicates three preferred sectors in Israel: the banking sector, defense stocks, and IT stocks (such as Matrix, One Technologies, and Melam Team). “After sharp declines, they returned to trading at attractive valuations. The banks benefit from a good business environment, and defense companies benefit from quality products and growth in defense budgets.” Regarding the IT sector, he identifies a bottom in the declines after a one-time sharp repricing.
Abroad, he notes that “there is no alternative to the giant companies,” and marks the infrastructure sector (ETF XLU) and real estate as interesting, given the world’s electricity shortage and the expected interest-rate decline.
*** The foregoing does not constitute investment advice. The statements reflect the author’s opinion only at the time of publication and do not take into account the data of any person.
