Turmoil in the markets: The dramatic split in the Fed that threatens the shekel and the dollar
The interest rate decision in the US led to a wave of rumors and fears of runaway inflation. Why should the giant collapse in South Korea worry us all, and how will the tensions with Iran and oil prices affect everyone's pockets?
The main story in the markets this week is the crack that has formed in investor confidence in the United States Central Bank (Federal Reserve). Dr. Ilan Gildin, partner and hedge fund manager at Karni Family Office, explains that investors were surprised by the words of Chairman Kevin Warsh and interpreted them as a lack of willingness to fight rising prices. The split among committee members, with three members supporting an interest rate hike, alarmed the market, pushed the yield on 30-year bonds to 5.2%, and pressured stocks downward.
The weakening of the dollar is not a sign of economic strength, but of confusion and uncertainty. According to Gildin, if the US Central Bank delays its response, the shekel may strengthen. On the other hand, a spike in oil prices following the war with Iran could raise inflation again. In such a situation, the bank in the United States will be forced to raise interest rates, and the dollar will return to strengthening sharply against the shekel, especially if the Bank of Israel decides to lower the interest rate in the country.
Dr. Ilan Gildin, PR
The declines recorded this week on the Tel Aviv Stock Exchange are causing concern, but Gildin reassures: "This is only a temporary correction and not a change in trend." The combination of security tensions, sales by investors who wanted to realize profits, and fears of high interest rates in the United States put pressure on the local market. As long as Israel's economic data remains stable and there is no unusual security escalation, there is no reason to assume that the long-term growth trend has been damaged.
At the same time, the turmoil in South Korea serves as a warning sign for the whole world: the KOSPI index plunged by about 40% in just 40 trading days. The wave of sharp sales in chip giants Samsung and SK Hynix, alongside the flight of foreign investors, illustrated the danger of relying on a single sector. Gildin warns that when the trading atmosphere changes, markets that depend on a limited number of giant companies become particularly volatile and dangerous.
