S&P 500 Retirement Funds See Mixed July Amid Market Volatility and Currency Shifts

July was marked by significant market volatility driven by geopolitical tensions, particularly fears of conflict with Iran, and sharp fluctuations in tech stocks and semiconductor shares. The Tel Aviv and Wall Street markets experienced sharp ups and downs, with semiconductor stocks suffering their worst month since 2008, triggering a major sell-off in South Korea’s stock market. Major tech companies reported earnings that caused extreme price swings, wiping out hundreds of billions of dollars in market value within days. Meanwhile, the US dollar strengthened about 9% against the Israeli shekel since May, impacting returns for Israeli investors.

Despite the turbulence, most pension and provident funds in Israel recorded slight losses in July. According to Avi Berkovitz, Chief Investment Officer at Meitav Pension and Provident, general investment tracks fell by approximately 0.5%, equity tracks by around 0.9%, and pension funds for younger savers dropped about 0.4%. The only exception was the S&P 500 index-linked track, which rose 2.4% due to the shekel’s depreciation against the dollar, effectively hedging foreign market losses. However, the S&P 500 itself declined slightly in July.

Investment experts emphasize the long-term value of the US market despite short-term volatility. Idan Azulai, Chief Investment Officer at Sigma-Clarity, advises investors to maintain their S&P 500 holdings, viewing recent fluctuations as noise rather than a trend reversal. Conversely, Eyal Shina of Pasternak Shoham Investment House warns that a high-interest-rate environment and geopolitical risks could continue to pressure the S&P 500.

The final trading day of July saw gains in Tel Aviv and Wall Street, but these were not reflected in most Israeli funds’ July returns as they closed before Friday’s trading. The semiconductor sector’s 22% drop in July and South Korea’s Kospi index’s wild swings underscore the global impact of US market movements.

Looking ahead, local market performance in Israel will likely hinge on developments in the Iran conflict and upcoming elections. Shina notes that a resolution to the nuclear threat and election outcomes could significantly influence market sentiment. Azulai expects limited market movement until election results are clear, with investors awaiting economic data and corporate performance before adjusting portfolios.