Tel Aviv Stock Exchange Sees Major Divergence Between Leading and Mid-Cap Indices
The Israeli stock market in 2026 shows strong gains for the Tel Aviv 35 and Tel Aviv 125 indices, while the Tel Aviv 90 lags behind due to market concentration and interest rate pressures.
Three-quarters of the civil year are behind us, and 2026 is shaping up to be a strong year for the Israeli stock market. While this year's indices are far from posting the sharp gains of 2025—which saw surges of 51.6% and 51% in the Tel Aviv 35 and Tel Aviv 125 indices, respectively—both remain deep in positive territory. The Tel Aviv 35 index has risen by 16.8% since the beginning of the year, while the Tel Aviv 125 has added 11.9% to its value.
However, despite the rosy picture of the Tel Aviv 125, more than half of the stocks included in it—67 out of 126—have recorded declines since the start of the year. Positive returns are not shared across all indices. The Tel Aviv 90 index has dropped by 3.6% year-to-date, representing a negative performance gap of more than 20 percentage points compared to the leading indices. In 2025, the Tel Aviv 90 recorded a return of 46.6%, meaning this divergence is not a long-term trend, but one that has opened up exclusively this year.
The Concentration of Gains
The gap between the indices stems largely from their composition and the concentration of gains. Unlike last year, the stock market rally is far from uniform. Within the Tel Aviv 35, Tower Semiconductor stood out in particular, surging 83% since the beginning of the year and contributing 3.5% to the index's return. Alongside it, Harel Insurance and Financial Services jumped 65%, contributing 1.3%, while Phoenix, Teva Pharmaceutical Industries, and Elbit Systems also posted strong contributions.
The surge in Tower, a chip manufacturer for the AI industry, turned it into a central growth engine amid the massive global boom in semiconductor stocks driven by the artificial intelligence revolution. Conversely, the Tel Aviv 90 lacked a similar engine to compensate for weaker stocks. Furthermore, due to its larger number of components, the Tel Aviv 90 includes companies whose values plummeted this year, such as Energean, Amot Investments, Equital, and Electra Real Estate.
Diverging Views Among Market Experts
Lior Wax, CEO of Infinity Portfolio Management, believes that investors should stick to the leading indices.
Despite three consecutive years of very strong gains, I would still focus right now on the leading indices—the Tel Aviv 35 and Tel Aviv 125. The banks reflect the Israeli economy, and insurance stocks thrive when the capital market is booming, as they have high exposure to the local stock market.
In contrast, Eyal Shina, Chief Investment Officer at Pasternak Shoham Investment House, sees clear potential in the Tel Aviv 90.
The valuation gap between the index stocks is already significant given the gains in Tel Aviv 35 shares compared to the Tel Aviv 90. This means there are stocks in the Tel Aviv 90 that are very attractive for investment. Additionally, with the upcoming elections, if investors are pleased with the outcome, cheap valuations and a desire for local exposure could propel the Tel Aviv 90 upward.
