Navigating Market Volatility: Sela Investment House CIO Ofir Serdam on AI Stocks and Risk
Sela Investment House CIO Ofir Serdam analyzes the recent tech stock correction, VIX fear index thresholds, asset allocation strategies, and local market resilience amid ongoing economic uncertainties.
Ofir Serdam, 48, has an unconventional background in the capital market. Growing up in a working-class neighborhood in Ashkelon, investing was a childhood dream. After working through exams while serving in the military, he joined Bank Hapoalim shortly after shedding his uniform in 2006. Today, he serves as the Chief Investment Officer and professional manager at Sela Investment House, managing roughly half a billion shekels, while also lecturing at the Hebrew University on options, futures, and risk management.
A Red Flag Risk Level
Discussing the recent market correction in the USA, driven by tech and artificial intelligence stocks dropping more than 20% from recent peaks, Serdam notes that risk levels spiked significantly. This followed a negative surprise in USA inflation data pointing to an annual rate of 3.7%. He explains that the VIX fear index rising to 22 points signals a red flag requiring extreme caution, whereas 15 points represents a calm white flag and 30 points or higher acts as a black flag. Historically, a VIX spike above 50 has consistently served as an attractive entry point yielding positive returns across any timeframe.
Serdam advises against relying on sensationalist doom-and-gloom forecasts or comparisons to the dot-com bubble. However, investors who lost sleep during the recent downturn should review their portfolios and asset allocation to ensure alignment with their personal risk tolerance. Those holding fundamentally sound assets in technology and semiconductors should remain composed and avoid rushed selling ahead of the upcoming earnings season and political developments.
Navigating the Local Market and Elections
Addressing the upcoming elections in Israel, Serdam believes that market stability depends more on achieving a definitive outcome and ending uncertainty than on any specific political outcome. Despite the Tel Aviv 125 index posting a negative return of 5% over the past six months following a doubling in the previous two years, Serdam remains fundamentally optimistic regarding the domestic market due to strong underlying economic data.
Serdam advocates for a disciplined approach centered on broad market indices to minimize individual stock dependency in an increasingly concentrated market where a handful of giants drive most returns. For conservative investors, he recommends a balanced portfolio featuring broad equity indices alongside Israeli government and corporate bonds, as well as USA fixed income. For aggressive investors, he suggests higher equity allocations in Israel and the USA, supplemented by exposure to emerging markets via specialized instruments that prioritize economic freedom.
