August Rally Boosts Israeli Pension and Provident Fund Savers Amid Global Market Gains

Israeli savers in provident funds and pension funds experienced a positive return in August, reversing two months of negative yields. While the local market led gains earlier in the year, Wall Street has taken the lead recently, with the S&P 500 rising nearly 12% and the tech-heavy Nasdaq up over 16% in the last six months. In August, general provident fund tracks saw an average return of 1.1%, with equity tracks gaining 2%. Pension funds also posted positive returns, ranging from 1% to 1.6% depending on age group.

The strengthening Israeli shekel against the dollar impacted August returns, reducing gains by 0.4% in general tracks and significantly more in S&P 500 tracking funds. Despite a volatile month marked by concerns over Iran and corporate earnings, global markets ended August with gains. The US market led, with the S&P 500 up 3.3% and the Nasdaq up 5%. European markets were mixed, while Japan's Nikkei rose nearly 8%. In Israel, the Tel Aviv 35 index gained 1.1% and the Tel Aviv 125 index rose 0.9%.

Investment house Altshuler Shaham, known for its significant exposure to overseas markets and the Israeli banking sector, may see strong returns due to these sectors outperforming in August. This comes despite the firm facing billions in withdrawals from its provident fund operations due to weaker past performance. "US earnings season provided a solid basis for the rallies," noted Daniel Leitner, CEO of Tamir Fishman Mutual Funds, highlighting that 86% of S&P 500 companies beat profit forecasts.

Looking ahead, experts anticipate September could be a challenging month, historically the worst for the S&P 500. Factors influencing the market include the US Federal Reserve's interest rate decisions and geopolitical tensions with Iran. "Two key things will set the tone in September," said Ze'ev Solomon, head of private clients at Four Seasons Financial Planning, pointing to the Fed's interest rate decision and the "winds of war in Iran."

Despite August's gains, the Israeli market's performance in the last six months has been stagnant compared to Wall Street's significant rise. The strengthening shekel has also eroded some of the gains for shekel-based investors tracking US markets. Looking at the year-to-date performance, general provident fund tracks have returned an average of 6.6%, equity tracks 11%, and S&P 500 trackers around 6%.