The result of Tuesday’s election triggered sharp declines in the Tel Aviv Stock Exchange’s (TASE) leading indices, with the construction and real estate sectors taking the hardest hit. Yet, even following these drops, IBI Mutual Funds CEO Ori Ben Dov, which has NIS 90 billion under management, believes the TASE remains unattractive. In theory, he argues, there is still significant room for further decline, regardless of the election outcome. More broadly, he contends that political scenarios should not factor into investment considerations.
"All this talk, whether it’s euphoria or, conversely, despair, I find amusing. Let’s talk about valuation multiples," says Ben Dov. "The market is more attractive today than it was a few days ago, simply because it’s falling. We evaluate things by looking at the available alternatives. Back in March, I noted that the US stock market was extremely cheap compared with the Israeli market. Since then, we’ve seen a 15% rise in the U.S. and a 10% decline in Israel and I still stand by that assessment."
Ben Dov adds that even following the declines, the TASE remains unattractive relative to its own historical norms: "One must understand that for the 10-15 years leading up to two years ago, historical price-to-earnings (P/E) ratios in Israel hovered between 12 and 13. Today, even after the declines, we are at a multiple of 17, meaning theoretically there is still significant room for further downside. We evaluate the quality of companies in relation to their valuation multiples - their market price. Ultimately, economic fundamentals prevail, and valuations must be justified."
In his view, the composition of the government is irrelevant when it comes to investment decisions: "Whether or not a unity government is formed, or the outcome of the US midterm elections, is of no concern to me. I don't factor these things in. Instead, I look at historical multiples. For the S&P 500, the historical average is 20, and it currently stands at 19, though it’s worth noting that the index is tech-heavy, which inherently leads to higher multiples. In Israel, the market has historically traded at multiples of 12-14. In March, it reached 20, which was absurd, and today it’s at 17. An investor should not attempt to worry about timing on the market. Our role as investment managers is like that of a DJ. I work within the parameters defined by the client - say, a 40% allocation to stocks and then I have to adjust the 'volume' between Israel and the rest of the world. And I still maintain that the TASE is less attractive than the US stock market."
"And yet, the election results are increasing uncertainty - doesn't that affect investments?"
"True, the stock market dislikes uncertainty. But if the market were trading at a multiple of 12 today and then dropped following the election results, I would argue that it’s attractive regardless of the outcome. Ultimately, it’s all a matter of price. No one can predict political scenarios. If I had said two years ago, during a war, that the Tel Aviv Stock Exchange would be the best-performing market in the world by 2024-2025, you would have thought I was crazy and that it made no sense. Yet, that is exactly what happened. So, whether it’s war, inflation, interest rates, who is president in the US, which government is in power here, war, or peace, I could construct 200 different pessimistic or optimistic scenarios based on all these factors, but the stock market simply doesn't care."
Drowning in an inventory of apartments"
The real estate sector is leading the decline on the TASE following the elections
"There’s a famous scene in the movie *Pulp Fiction* where someone says, 'Zed is dead.' Well, I say real estate in Israel is dead. It’s been dead for two years, and the situation is only going to get worse and this has nothing to do with the elections. Israel is flooded with apartments. There are 85,000 unsold units, plus at least another 10,000 that have dropped out of the official count because the Central Bureau of Statistics stops tracking unsold apartments after 15 months. There was a time when apartments here sold like hotcakes; that’s no longer the case.
"Israel is drowning in demolition and rebuild urban renewal projects. We have an oversupply, a surplus of migration, and interest rates hovering around 3%-4%. This means the real estate market is dead for the next few years. Real estate cycles, after all, span years. A downturn in this sector isn't just a matter of a month or two, or even a year or two. Every time, the developers come up with a different tall tale. First they said they were 'waiting for the hostages' - well, they’ve returned; then it was 'Iran 1' - that’s over and then 'Iran 2' and that’s over, too. They’ve claimed people would 'come from abroad because of antisemitism,' and that they were 'waiting for the elections,' and so on. That’s the kind of talk you hear when there’s nothing solid to fall back on. Talk to me about economic fundamentals, not prayers."
Given his assessment that the sector will continue to decline, Ben Dov foresees a bleak future for real estate investors in Israel, noting that the market is "only in the first third or 40% of its downturn." As an example of the aggressive promotional deals currently in the market, he points to recent transactions in which REITs (Real Estate Investment Trusts) have purchased large batches of apartments, securing generous discounts from developers who were unable to sell them on the open market.
In one instance, the 'Abu Family Residential' fund acquired 50 apartments in Netanya from Azorim for NIS 120 million. On this deal, Ben Dov says, "In Netanya, you’d need a snorkel to keep from drowning in unsold apartments. A developer who can't manage to sell a single unit, even at an 8% discount, ended up offloading 50 apartments at a 20% discount. That is the state of the real estate market."
He thus believes the election results are entirely inconsequential: "The elections might be adding fuel to the fire, but the fire is already a full-blown bonfire," he jokes.
"I don't see any interesting sectors."
Are there any sectors on the TASE that are interesting right now?
"The average investor should stick to market indices. Sectors come and go. Sometimes it’s the banks, other times it’s insurance companies. Just a moment ago, the semiconductor sector was the hottest in the US, yet it dropped 25% in two months. You need to diversify.
"Our role as investment managers is to figure out how to balance exposure between Israel and abroad. It’s about asset allocation: short-term versus long-term bonds, unlinked (shekel) bonds versus linked bonds, and Israel versus international markets. The core issue is geographic distribution, which is critical. There are also market distortions that we, as investment managers, need to identify and act upon.
Right now, I can’t think of a single sector on the TASE that is attractive, either in terms of its own historical performance, or when compared to a similar US sector."
What lies ahead?
"In the world of investments, there is a 'return to normal.' The stock market typically yields an average of 9%-10% annually, including dividends. After a 3-4 year rally, during which both domestic and global markets gained nearly 100%, it is clear that this trend cannot continue. What we have witnessed in the Israeli stock market over the past two to three years is simply wild and entirely unrepresentative. Talk to me when the market is trading at a multiple of 13-14. Perhaps then I’ll start considering it attractive. But right now, it’s nowhere near that level."
Nevertheless, Ben Dov emphasizes that he is not advocating for the sale of Israeli stocks, but rather for a re-evaluation of asset allocation. "If an Israeli investor is heavily skewed toward the local market - holding, for instance, 70% of their equities in Israel then that is a mistake. If their exposure to the Israeli stock market exceeds their exposure to the US market, that is also a mistake."
What about when you factor in the impact of the shekel-dollar exchange rate?
"The dollar has returned to its level from March. Whether it rises or falls from here is irrelevant. The fact is that the S&P index is currently trading around its historical multiple, whereas the TASE is 20%-30% above its own historical multiple and that is what truly matters."
Published by Globes, Israel business news - en.globes.co.il - on October 29, 2026.
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