2024-02-02 04:20:00
Sahar Gamaliel (photo by Inbal Marmari)
Sahar Gamliel, director of the financial consulting unit in the consulting and research division of Bank Hapoalim, is one of the most interesting and important figures in the Israeli capital market. If you are a customer of Bank Hapoalim on its derivatives and affiliates, it is likely that you invested your money on the basis of a recommendation by the department based (among other things) on its analysis. Nice to meet you, one of the key figures in the capital market that you didn’t know.
In a special interview with ice, Gamliel analyzes the market and its direction, and just as importantly, he reveals where the money has been going in recent months.
How do you see the capital market right now with all this uncertainty?
“In order for us to understand things better, I want to start with what we went through last year and I want to remind you until we got to the war and everything that we know today. So last year we started with interest rate increases and as of today the interest rate in the world and in Israel is a high interest rate that will certainly not remain that way for a long time and it is Spinach.
“Now this high interest rate came from my data inflation In the US it has already reached 9% and as inflation moderated the interest rate hikes stopped. And the question now is: when will the interest rate drop and by how much. We know that the more we raise the interest rate we will lead to a slowdown in the economy and even to recession. The employment and inflation data are published every month.”
And what do we see today?
“We see in employment that the US economy is strong and growth is also positive. It is good for the markets because we were not led into recession with the high interest rates and we are asking today when we will return to normal interest rates.”
What is normal interest?
“Currently the interest rate in the US is 5.5% and 4.5% in Israel* and these interest rates are too high. We are talking in Israel about a normal interest rate in two or three years of 2%-3% and in the USA 3%-4%, this is reasonable and beyond that it is difficult for the economy to conduct itself for a long time.
“What will accompany us in the US is inflation and employment. We see a moderation in inflation. When the expectations at the moment are that at the end of the year the interest rate in the US will be 4.5% and that means 4 cuts of interest rates.
“But I want you to understand that when the interest rate is expected to fall, it means that from the market’s point of view, “everything is embodied” if the interest rate drops to 4.5%, there will be no drama in the markets. If it drops less than that, it will not be good, and if more than that, it will be good for the market. At this level, we will not be in a crazy rally – Everything is already embodied.”
Let’s talk about Israel for a moment
“In Israel, 2023 was a difficult year. We started with the legal coup, interest rate hikes and certainly the war that started at the beginning of October. Here too (in the economy, NK) the war has an effect. When inflation started to moderate, this led the Bank of Israel to cut one interest rate at the beginning of January.
“In my opinion, the lowering was intended to mark something. We understand that the war has an effect and if the data continues to show a decrease in inflation then we will feel comfortable lowering the interest rate because the war is money and we will pay for it later through taxes such as an increase in VAT.
“Currently in Israel there are other effects. The risk premium of how we are perceived in the world? What will be the effect of the Houthis on maritime transport and inflation? And we must remember, 30% of imports pass through the port of Eilat and this will lead to inflation in Israel and in the world in general.”
So the interest rate cut was intended to signal that the Bank of Israel would support the economy while the government raised taxes.
“It is likely that the Bank of Israel in the coming period will act in the following interest rate decisions in accordance with the Fed’s decisions and according to the Fed’s behavior the interest rate in Israel will be determined. It depends on the data. If they do not lower the interest rate in the US, the Bank of Israel will not rush to lower it either. The interest rate expectations in Israel for another year speak of a wide range when some say it will be 3.25%, but the consensus speaks of 3.5% to 3.75% and everything is already embodied in the markets.”
When you have to translate all this mess into investment recommendations for your clients, what’s the bottom line?
“From the point of view of our clients, diversification is important and we are talking about investments in Israel but also outside of Israel. Last year a lot of money flowed into indices abroad and we saw a lot of Israeli money there. The reason was the legal revolution and currently also the war.
“During 2023, a lot of money flowed into financial funds, and in the interest rate environment we reached, it was possible to get about 4.5% with a tax shield for a period of one year, so we said, why do we need risk? As of today, when we talk about interest rate cuts, the attractiveness is decreasing and at the beginning of the year, we see the local market moving quite a bit Money for index-couples”.
“The fear of increased inflation following the war and the taxes and the Houthis and the maritime transportation, we see money flowing into the index-linked channels. We also see money flowing in the world of financial funds for bonds managed. In the last two years, a lot of money has gone out of there, and from the beginning of the year, we see money returning to these funds. general bond
“The war, like any event, ‘uncertainty’ led to a drop in prices and slowly it went back up. We understand the risks in the real estate sector which is stuck (due to a lack of practitioners, etc.) but it very much depends on how the war will develop. It will develop and get worse. It is likely that even in the local market we will not see any different behavior than in the rest of the world.”
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