Israeli Investment Chief Urges Full Equity Exposure Citing Iran Tensions and Local Market Strength

Lior Vaks, CEO of Infinity Portfolio Management, has strongly recommended investing in Israeli stocks over the past two years, a strategy that has paid off well with the Tel Aviv 125 index rising 28% last year, outperforming major global indices like the S&P 500 and European markets. Despite a nearly 10% drop in June, Vaks views this as a buying opportunity, expecting a rebound supported by recent interest rate cuts by the Bank of Israel to 3.5%, with potential further reductions ahead amid low inflation.

Vaks also anticipates renewed geopolitical tensions, particularly involving the US, Israel, and Iran. He believes that escalating conflict with Iran could positively impact the Israeli stock market, as past security threats have coincided with market gains locally, unlike in the US. Globally, he identifies the ongoing US-China rivalry as the key economic story, with trade tensions and energy market dynamics favoring the US and Russia but challenging Europe, which he advises investors to avoid due to high inflation and internal conflicts.

Regarding US monetary policy, Vaks diverges from consensus by predicting no imminent Federal Reserve rate hikes, citing weak employment data and political pressure from President Trump for lower rates. He remains bullish on the Israeli shekel's long-term strength despite recent weakening against the dollar, attributing this to the robust high-tech sector and significant foreign investments.

For portfolio construction, Vaks suggests conservative investors allocate 12.5% each to Israeli and US equities, with the remainder in Israeli bonds, avoiding foreign bonds due to currency considerations. Aggressive investors might hold 100% equities split evenly between Israel and the US. Sector recommendations include Israeli defense, finance, tourism, and hospitality stocks, alongside US technology, quantum computing, and software sectors. He cautions about high valuations in US chipmakers and speculative tech firms like SpaceX.

Infinity is currently under regulatory review by the Capital Market Authority for delays in client fund transfers, attributed to rapid growth and operational strains following a 4,000% increase in pension fund assets over three years. Vaks remains confident in the firm's performance and market outlook.