Bank Investment Chief Says Insurance Stocks Are Too Expensive, Prefers Tel Aviv 125
Haim Butnaru, head of investment centers at Bank Hapoalim? No, the international banking group? In the article, he says investors should look at their portfolios as a whole rather than chase the latest stock tips on social media. He argues that after years of gains, many Israeli investors are overly concentrated in technology, especially U.S. mega-cap stocks such as Nvidia, Google and Microsoft, and should diversify into other sectors.
Butnaru notes that about a year and a half ago, after the pager operation against Hezbollah, he recommended shifting more money into the local market, especially banks and insurance, and that call worked extremely well. Since then, the Tel Aviv 125 has jumped 75%, bank shares about 50%, and insurance stocks nearly 200%. Over the same period, the S&P 500 rose about 30% and the Nasdaq nearly 40%. Now, however, he says insurance shares have become too expensive, partly because of the IFRS 17 accounting standard, and believes the Tel Aviv 125 will outperform the insurance index over the next year.
On interest rates, Butnaru expects the Bank of Israel to cut rates by 0.25 percentage points next month and by 0.75 points over the coming year, more than the market expects. He says this is supported by easing tensions after the U.S.-Iran agreement, falling oil prices to around $80 a barrel, and lower inflation pressure if the Strait of Hormuz remains open. In the United States, he expects rates to stay unchanged or rise because inflation has climbed to 4.2%, a three-year high.
He also sees the shekel strengthening, with the dollar likely trading between 2.8 and 2.9 shekels, possibly up to 3, helped by foreign-currency inflows and gas agreements with Egypt and Jordan. He says a sharp drop in U.S. stocks or security events could push the dollar higher. For conservative investors, he recommends reducing equity exposure and holding 7.5% Israeli stocks, 7.5% U.S. stocks, 40% Israeli government bonds, 20% Israeli corporate bonds, 15% foreign bonds and 10% in cash or a money-market fund.
For aggressive investors, he keeps equity exposure high, with 25% Israeli stocks, 25% U.S. stocks, 5% emerging markets through EEM, 5% hedge funds, plus bonds and corporate credit. He favors Israeli banks, infrastructure and gradually building exposure to real estate, and abroad he likes semiconductors, power transmission, defense and space via XAR, health care via XLV, large banks via XLF and emerging markets via EEM. He advises avoiding traditional energy and U.S. real estate.
