Investment Advisor Urges Caution on S&P 500 Amid Market Volatility

Guy Almog, head of investment advisors at Bank Jerusalem, is advising investors to remain cautious about the S&P 500, despite his previous successful recommendations. A year ago, Almog advocated for increased exposure to both Israeli and global stocks, with a preference for the Israeli market. Since then, the Tel Aviv 125 index has surged 36%, and the S&P 500 has risen 26%. He also correctly identified local finance stocks and renewable energy as leading sectors.

Almog stresses that timing the market is impossible and advises against trying to buy at the bottom and sell at the peak, emphasizing patience and understanding personal risk tolerance for long-term investing. He notes that market reactions to events like the COVID-19 pandemic, 2022 inflation-driven downturns, and geopolitical tensions tend to be exaggerated initially but diminish over time.

Regarding rising US Treasury yields, reaching 4.7% for 10-year notes and 5.3% for longer-term ones due to a $40 trillion deficit, Almog suggests monitoring developments but admits there's no immediate action to take. He anticipates the Israeli shekel will strengthen long-term, with the dollar trending downwards due to massive dollar inflows into high-tech, including $26 billion in foreign investments last year. While the Bank of Israel has intervened to support the shekel, Almog questions its ability to alter the long-term trend.

Almog recommends currency-hedged assets for local investors buying foreign indices like the S&P 500 to mitigate potential losses from dollar depreciation. He reiterates that consistency in the market is more crucial than portfolio composition, advising investors to adjust risk levels to ensure long-term participation.

For a conservative investor, Almog suggests 15% in Israeli stocks (TA 125, finance, green energy), 10% in US stocks (5% S&P 500, 5% Nasdaq, currency-hedged), 40% in Israeli corporate bonds, 25% in Israeli government bonds (5-10 year maturity), and 10% in foreign corporate bonds. An aggressive investor profile includes 50% in Israeli stocks, 15% each in S&P 500 and Nasdaq, 5% in the SOXX semiconductor index, and 5% in India. The remaining 10% can be in Israeli corporate bonds or split between bonds and cash for opportunities.

Almog continues to favor local finance stocks, noting their growth and reasonable price-to-earnings ratios, and sees significant potential in green energy due to rising electricity demand for AI data centers and transportation, coupled with the retirement of old power plants. He also highlights the semiconductor sector's ongoing demand, citing recent reports from Nvidia and Broadcom, and sees AI's impact in shortening drug development times in the pharma sector.