Investment Chief Sees US Bond Yields as Key Market Challenge, Recommends Diversified Portfolios

Eytan Lipkovich, CEO of Horizon Investment House managing 2 billion shekels, identifies the recent surge in long-term US government bond yields as the main concern for investors. He warns that yields have returned to 5.2%-5.4%, levels the Federal Reserve and US government will try to contain to avoid market turmoil. If yields rise to around 6%, it could severely impact sectors like real estate, already under pressure. Lipkovich highlights the US debt exceeding $40 trillion, noting that a 5% interest rate on this debt would mean $2 trillion annually in interest payments, exacerbating financial strain.

Despite these risks, Lipkovich views the current market pessimism as an opportunity. He points to the recent minor but historic bond-buying program by the US Treasury as a positive signal that could support stock markets by increasing bond demand and lowering long-term rates. He also warns of inflationary pressures from rising oil prices, which could spike to $100 per barrel if conflict with Iran escalates, and from agricultural commodity price increases due to weather damage.

Regarding the Israeli market, Lipkovich says the major rally seen last year has ended, with the market now stagnant amid geopolitical uncertainties involving Lebanon, Syria, and Iran, as well as upcoming elections. He advises a portfolio allocation of 60% international exposure and 40% Israeli assets, reflecting Israel’s small market size. For conservative investors, he recommends a 30% equity and 70% bond split, with specific allocations to Israeli government and corporate bonds, noting that corporate bond spreads are currently at historic lows. For aggressive investors, he suggests 50% equities and 50% bonds, with a higher weighting in lower-rated corporate bonds that have been undervalued due to recent turmoil in US real estate bonds.

Lipkovich enthusiastically recommends Apple stock, expecting a strong year driven by new iPhone chip upgrades and AI capabilities, including secure AI deployment for enterprises. He also favors US industrial and aerospace sectors due to global arms demand. In Israel, he highlights banks, especially Discount Bank, the Tel Aviv Stock Exchange, insurance companies, technology, infrastructure, and communication sectors. He also suggests exposure to US healthcare, Nasdaq, semiconductor, and financial ETFs, citing AI-driven innovation and political support for healthcare expansion.

Lipkovich concludes that while risks remain, especially from geopolitical tensions and inflation, current market conditions offer unique buying opportunities for disciplined investors.