Another day of protests against the reform of the judicial system started this morning (Monday), when crowds went to protest centers all over the country. Meanwhile, the concern among senior economists about the impact of the reform on the Israeli economy is already showing its signs, which is reflected in falling prices on the Tel Aviv Stock Exchange, the weakening of the shekel against the dollar and the euro, and more. Daniel Shabaksthe director of the financial division at “Hirshovitz Solutions”, explains what awaits us in the future, and how we can prepare for the future.
A day of protest: opponents of the reform block major roads throughout the country ongoing updates
We see that the stock market is struggling to rise. Will once the parties reach a consensus regarding the stock market reform again will you take off
“There is no denying that the stock exchange in Tel Aviv is affected by political events, although it is important to remember that on the other hand there are dozens of other data that affect trading at any given moment – from reports of traded companies to macro data from Israel and the world. It is quite possible that a report on a legal reform that will be widely accepted will lead to a green peak in the homestead, but it is likely that it will not be on the hysterical scale that the local stock market has not yet known. It is important to remember that the local stock market performed exceptionally well compared to the world’s leading indices, and it is possible that the current underperformance is merely a necessary correction. As a reminder, the Tel Aviv 35 index closed 2022 with a 10% excess return compared to the S&P500, while from the beginning of 2023 it presented a 7% underperformance. That is, despite the declines, Tel Aviv 35 investors achieved better performance.
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Activists against the legal reform blocked Highway 1 (Photo: The Struggle Headquarters)
In the shadow of the strengthening of the dollar against the shekel, do you estimate that people will continue to take money out of Israel even after the broad agreement?
“Definitely no. Any unjustified exposure to foreign exchange constitutes an additional risk for investors. There is no economic sense that justifies a switch to the dollar for those who live on scales. In this context, it is important to remember that the Americans have an interest in the dollar not strengthening too much, so even if the dollar is now performing well, it is very possible that this is something temporary and it is not correct to base a long-term economic plan on it.”
Do you expect the banks to raise the interest on deposits to return the companies’ money to Israel?
“Unfortunately, the banks do not make up the gap between the interest they give to depositors and the interest they receive on loans. They are still strong enough and have no interest in changing policy because of one or another amount withdrawn from their accounts. The banks also know that depositors in most countries in the world receive zero interest from the banks , and are aware that the customer does not have a better alternative in this channel. Evidence of this can be seen in the fact that, despite the meteoric growth of the entire world of social lending (P2P) in Israel and around the world, the banks do not offer preferential terms to depositors who have decided to withdraw their funds.”
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Daniel Shabaks (Photo: Courtesy of the photographer, press release)