June Decline in Tel Aviv Pulls Down Pension Fund Returns While S&P 500 Outperforms
June tested the patience of Israeli pension savers as local stock indices experienced sharp declines, contrasting with mixed trends on Wall Street. The general pension fund track recorded a negative return of 0.6% in June but remains up 5.8% year-to-date. The month saw a thaw in US-Iran relations with progress toward a ceasefire agreement, which dampened sentiment in the Israeli capital markets and contributed to the negative returns in pension funds.
Despite the local market downturn, pension funds linked to the S&P 500 index posted an exceptional positive return of 4.8% in June, though this was only half the general fund's year-to-date gain, standing at 2.9%. The equity segment of pension funds fell sharply by 2.3% in June but still rose 9.7% in the first half of the year. The comprehensive pension track for those under 50 saw a 0.9% loss in June but gained 7.3% since the start of the year.
Avi Berkovich, Deputy Chief Investment Officer at Meitav Pension and Provident Funds, noted that despite June's negative results, the industry closed the first half with a strong average return of 5.8%. He highlighted that gains in both domestic and global equities, as well as Israeli government and corporate bonds, driven by expectations of further interest rate cuts, were key contributors to positive returns. The strengthening of the shekel by 6.7% reduced overall fund returns by about 1.2%, while the dollar's appreciation against the shekel boosted S&P 500-linked returns.
In the Israeli stock market, despite June's losses, the first half of the year showed solid gains: the TA-35 index rose 12%, TA-125 up 9.5%, TA-60 increased 11.9%, and TA-90 edged up 0.3%. June declines were steep, with TA-35 down 8.7%, TA-125 down 9.5%, TA-90 down 11.2%, and TA-60 down 5.6%. In contrast, US markets showed mixed results in June: Dow Jones rose 2.5%, S&P 500 fell 1.1%, and Nasdaq dropped 2.8%. The dollar's strength against the shekel added approximately 5.9% to returns in shekel terms.
Analysis by Meitav revealed that the Dow Jones and Japan's Nikkei indices contributed positively to pension fund returns by 2.5% and 8.3%, respectively, while the S&P 500 and Israeli indices detracted from returns in June. Israeli government bonds added 0.4%, and currency changes contributed 5.9% to overall pension fund performance.
