Israeli Stock Market Sees Mixed Half-Year Performance Amid Sector Divergence
The Israeli stock market experienced a turbulent and complex first half of the year, as detailed in episode 386 of Calcalist's Money Engines podcast featuring chief economist and strategist Uri Greenfeld from Agam Leaders. The Tel Aviv 35 Index rose approximately 12% since the start of the year, but this overall gain masks significant disparities among sectors. Infrastructure and energy stocks surged by 40%, technology climbed 22%, and insurance increased about 17%, while banks declined 7% and real estate fell 2%.
A key driver behind the market's performance was the Tower stock, which alone rose about 91% and heavily influenced the Tel Aviv 35 due to its large index weight. In contrast, the Tel Aviv 90 Index, representing more of the local economy, lagged behind, highlighting the gap between large and smaller companies. The first quarter saw investors optimistic about a "new Middle East" scenario, pricing in a powerful economy, peace dividends, and massive investments. Concurrently, the energy sector boomed with companies like Mega Or, Doral, and Generation doubling in value amid rising demand for infrastructure and data centers fueled by the AI revolution. The insurance sector also benefited from the rally, reaching historic price-to-book multiples.
Looking ahead, the outlook remains complex. Interest rate cuts expected in Israel may support the local market, whereas in the U.S., the concentration in the technology sector and passive investing pose systemic risks. The rise of private investors, who have yet to face a true recession, is another notable trend. On a positive note, trading volumes jumped about 65% in the half-year, partly due to the introduction of Friday trading sessions, which attracted foreign investors. The podcast episode further breaks down these themes, including banking, interest rates, AI-driven energy demand, and insurance sector dynamics.
