Market Turmoil Has Investors Racing for Dollars, but an Expert Warns Against It

Security tensions and declines on the stock exchange have brought fear back to the markets, while the dollar has again strengthened against the shekel. But alongside the panic, some are warning against making hasty decisions, especially when it comes to buying foreign currency under pressure. Daniel Shvaks, head of a financial division, writes in a Maariv column that in times of crisis the market tends to split into two camps, those who see every security incident as a sign of imminent collapse, and those who seek to examine the economic data without being swept up by the headlines. According to him, history shows that after security crises, markets in Israel have often recovered and even posted significant gains. Shvaks says some of the recent declines are not related only to events in Israel, but also to the trend on Wall Street. Over the weekend, the Nasdaq fell after strong employment data in the United States reduced expectations for an imminent interest rate cut and affected technology stocks in particular. As for the surging dollar, which is creeping up from below the 3-shekel mark, he says, "I know what is going through your heads," Shvaks says, "We have to buy dollars before everything collapses." "Wrong. The current strengthening of the dollar is a reflexive response of fear, and it certainly does not indicate that we have passed the bottom or that the shekel is finished. Do not rush to buy dollars in the middle of panic. Only last month, the Bank of Israel bought hundreds of millions of dollars precisely to prevent the shekel from strengthening too much and hurting exporters. Once the winds calm down a bit, the shekel could easily return to strengthening sharply."

Shvaks stresses that in the end, anyone who does not have to be exposed to foreign currency, because they do not have businesses across the world in dollars and their whole life is managed here in Israel, buying dollars is simply a bet. It adds another unnecessary element of risk to the portfolio, a kind of financial roulette, בדיוק when you should be looking for stability and real value assets. He also points to underlying fundamentals in the Israeli economy, including relatively low inflation, a rate cut by the Bank of Israel, and the continued strength of the high-tech sector. Therefore, according to this approach, the panic in the markets may be mostly temporary noise and not necessarily a long-term shift. The key question now is whether investors will act out of pressure, or wait to see whether the security tensions and market declines really translate into a deeper economic change.