"Unlike recent years, it’s not certain you need to be in the U.S. market this year"

While Wall Street has shown relative weakness in recent months, Israeli indices have been moving higher. Over the past three months, the Tel Aviv 35 index has risen about 6.2%, while the S&P 500 has declined around 5%. U.S. investors are worried about tariffs and escalating trade wars driven by Trump, whereas Israel has seen relative optimism following a ceasefire agreement. This optimism has fueled gains and even brought back some foreign capital. But Noam Meirovitz warns against getting carried away.

He believes the Israeli market is fully priced and that unresolved risks remain, such as the sustainability of the ceasefire and the political uncertainty that existed even before the war. Eventually, he says, the concerns weighing on international investors will reach Israel too.

Meirovitz also comments on the sharp drop in bond yields, from above 5% on 10-year government bonds to around 4.1%-4.2%. He questions whether these yields sufficiently compensate for the remaining risks and suggests that high-rated corporate bonds may offer some appeal, despite tight spreads that have shrunk to just 0.7%-0.8% in top-tier issuances.

"The local market is fully priced—I’d be cautious investing here"

How do you view the stock market?

"I think Israel’s market is largely fully valued, with some exceptions. We’ve somewhat decoupled from the U.S., which is a good thing, showing strength in recent months compared to Wall Street. I don’t know if the Israeli market will outperform the American market, but over a 2-3 year horizon, U.S. risks will become relevant here too. However, the reverse isn’t necessarily true—uncertainty from tariffs, trade wars, and global conflicts won’t spare the local market forever. And on top of that, we have our own domestic challenges."

"I’d take a cautious approach and not get carried away by recent gains. Some companies are in a strong business position, such as banks. But I’d avoid stocks with greater exposure to consumer spending fluctuations, like retail. I’d also be cautious with local real estate companies. Instead, I’d stick with firms that I see as more resilient—banks, insurance companies, and the like."

"Banks are a well-oiled machine—I don’t see what could stop them"

Haven’t bank stocks already made their move? Is there still upside?

"There’s no end to this. Of course, the government could drop some new regulation on banks tomorrow, but no one knows if that will happen. What we do know is that banks are a business that works. You can like it or not, but the numbers speak for themselves. They’re a locomotive that keeps running, and I don’t see a reason they’d suddenly start underperforming. If you look at their return on equity, the stock prices make sense. I don’t see any major threats on the horizon."

"I’d stay away from food retailers—consumers will cut spending"

How weak do you expect the consumer sector to be?

"The consumer sector has been booming, with companies able to raise prices significantly, and we’ve all felt it. This was partly due to global inflation and supply chain costs, but looking ahead to 2025, food retail chains appear particularly vulnerable. People will be less willing to splurge. Economic pressures will hit everyone’s wallets, and discretionary spending will tighten—grocery bills are one of the first places people cut back."

"Unlike recent years, it’s not certain you need to be in the U.S. market this year"

What do you expect for Wall Street this year?

"I tend to believe the market will end with flat returns. Markets dislike uncertainty, and Trump only adds to it. We see it with his tariffs and exemptions—he’s unpredictable, which makes it difficult for investors to gain confidence. As a result, we’re seeing money move elsewhere, to China and Europe. That might not be the right call long-term, but in the short term, I understand it."

"From a macroeconomic standpoint, tariffs are a terrible policy—they’re ultimately a tax on the American consumer. While the administration may try to reduce the national debt, the flip side is lower disposable income for consumers. I don’t see how the new administration will be a net positive for corporate earnings. If companies are forced to pay more due to tariffs, those costs will be passed on to consumers, which won’t help the broader economy."

"Unlike in recent years, I’m not convinced you need to be in the U.S. market this year. Diversifying geographically makes more sense. Last year, people asked why we held MSCI indexes in portfolios—this year, that decision looks more justified. Over the long run, the U.S. remains the best-performing market, but in the short term, diversifying internationally can be beneficial."

Which sectors in the U.S. are worth considering?

"If you’re staying in the U.S. market, healthcare is interesting. It took a hit after Trump’s election due to fears surrounding the new health secretary, but it’s rebounding. Consumer staples could also be a solid choice. On the other hand, energy seems too cyclical—if the economy slows, energy prices tend to decline, and we’re already seeing that with oil. Plus, the administration has an interest in keeping energy prices low. As for U.S. banks, we’ve been there, but we’re now looking for an exit. I think they’re fairly priced at this point."

What about technology stocks?

"That’s the big question. Multiples are coming down, which is a good thing. I wouldn’t adjust my tech exposure—I wouldn’t add or reduce positions. The market has already done a lot of the necessary repricing. That doesn’t mean we won’t see further declines, especially in the large caps, but valuations are a bit more reasonable now."

Should investors maintain dollar exposure?

"If I were holding foreign assets, I’d leave them unhedged. It’s hard to predict exchange rates, and I wouldn’t bet on currency movements. That said, we could see a scenario where bond yields fall alongside a strengthening dollar, which could be an interesting setup. But I wouldn’t base my entire strategy on that expectation."

What about Bitcoin and gold?

"I’m not a fan of Bitcoin personally. If someone is feeling bearish on the economy, I wouldn’t turn to crypto. Gold, on the other hand, is also speculative but has been working well. As uncertainty rises, gold benefits. If someone wants to add a speculative hedge to their portfolio, I think gold makes sense. I can’t predict where it will go, but we’ve seen central banks buying, and with global turmoil, there’s logic to holding some."