The Tel Aviv Stock Exchange came to a screeching halt six months ago. Following an extraordinary two-year rally during which the main indices more than doubled, the market lost momentum. It underwent a rapid sell-off, falling by more than 10% and entering correction territory in June. Since then, the market has attempted to rebound, but recently, red screens have once again dominated; the index is now down 15% from its peak.
Six months ago, the decline was driven by the market’s disappointment with the outcome of Operation Roaring Lion against Iran, which failed to topple the Iranian regime, and by the approach of elections in Israel. The more recent decline mirrors sharp drops in global semiconductor stocks; local chip stocks, too, have lost nearly a third of their value. This trend is accompanied by ongoing declines in the shares of defense companies, banks, insurance firms, and real estate companies, which rallied ahead of the elections only to lose ground afterward. Compounding this is the US midterm election held this week, where a Democratic victory has raised concerns about a possible shift in Israel-US relations. In short, the recent downturn is broad-based across the entire market.
Is it time to "buy the dip"? Looking at historical data, the answer might well be yes. According to Matan Shitrit, chief economist at Phoenix Financial, the Tel Aviv 125 Index drops by more than 10% at least once a year on average, meaning the current situation is far from a rare occurrence. Shitrit notes that the frequency of a decline of over 20% from the peak, signifying entry into a bear market, is once in just under four years.
What typically happens after the index falls more than 10% from its peak? According to Shitrit’s data, six months later, the average return is a positive 3.6%, and after one year it rises to 5%. If you wait until the trough, the subsequent return is nearly 27% within six months, and averages 37% one year after the low point.
We are now four and a half months after the Tel Aviv Stock Exchange recorded a correction, and the main index has fallen a further 3% since the onset. Does this mean that we are approaching the bottom? Historically, at least, the answer might be yes; in half of such cases, the maximum decline ended at a level comparable to the current drop.
In instances where market crises developed, the declines were far more severe, reaching tens of percentage points. In the crises of 2000 and 2008, the drop from peak to trough was about 50%.
A comparison with the US reveals a similar pattern there dating back to 1980. Declines of more than 10% occur slightly more than once a year, with the other metrics also exhibiting similar characteristics. According to Goldman Sachs, the market typically rebounds by nearly 8% within six months of a low, and by about 10% after one year. The US market experienced a decline of over 10% in March this year; it has surged by 19% since then.
"The problem is that we don't receive an SMS on our phones telling us when the bottom has arrived. One must keep this in mind when attempting to time the market," says Yaniv Pagot, VP of Trading at the Tel Aviv Stock Exchange. "In hindsight, we all know when the peaks and troughs occurred, but not in real time."
"No redemptions in mutual funds"
Pagot therefore suggests considering additional decision-support tools to determine when we are in a state of panic that presents a buying opportunity and when we are not. In his view, the current situation does not constitute a buying opportunity. "The best indicator of when the market becomes attractive is not how far it has fallen from its peak, but rather the level of pessimism, the increase in volatility, and the volume of redemptions in financial products such as mutual funds.
"That is the point at which we might say the expected return has likely increased. At present, while volatility has risen, it is not particularly high." The Tel Aviv Stock Exchange "fear index", which reflects the behavior of options traders, stands at 22 points, which although not low is also a long way from the 30-plus range.
"Moreover," Pagot adds, "while we have recently seen several days with declines of 2% to 3%, which may give a negative feeling, we have previously experienced days with drops of 5% or even 7%. We aren't seeing such days right now; there is no panic, and there are no redemptions in mutual funds-quite the contrary.
"At the moment, the market is searching for direction, but this is not the time to jump into it aggressively. On the other hand, this doesn't mean you should hold a fire sale, because no-one is going to send you a notification when the market starts rising again, if, for instance, an agreement is reached between the US and Iran."
Taking an entirely different view is Kobi Segev, co-founder of Achord Investment Management. "The Tel Aviv stock market has been treading water, and even declining, for the past six months," Segev notes. "The leading indices have fallen by 10%, while the Tel Aviv 90 index has dropped even further, by about 20%. In terms of business activity, however, we continue to see positive reports from companies, announcements of new contracts, and M&A deals. The political mood also influences the financial mood."
Therefore, in his view, "stock prices have corrected, presenting a favorable entry point for those who have been on the sidelines or are looking to increase their exposure. Earnings season has begun, and we anticipate positive reports that will point to continued growth in the private sector. With the exception of insurance stocks, all sectors have seen significant sell-offs. For those who assume that a new government will work for the benefit of its citizens, 'second-tier' stocks-those in the Tel Aviv 90 index-are now available at fairly reasonable prices."
"Prices are becoming more attractive"
The research department at investment firm Tamir Fishman concurs, noting that "extreme volatility in global markets is directly impacting the Israeli stock exchange. Locally, the market's trajectory will be influenced by political developments, from the possibility of further elections to the formation of a unity government, but, above all, by the behavior of global markets.
"Prices are certainly becoming more attractive, but there is no way of knowing when we will hit bottom, and no point in wasting time trying to guess it. Instead of that, it is wiser to focus on acquiring high-quality companies at reasonable prices and, above all, exercising patience. The capital market rewards patient investors, not those who try to time the bottom. Investing in stocks is a marathon spanning years, not a sprint lasting weeks; this is how sustainable, long-term returns are built."
Pagot of the Tel Aviv Stock Exchange agrees on one point, which is that the risk is lower in the main indices. "This year serves as a reminder of how the 'boring' index, the benchmark, performs and leads during difficult times. Anyone who moved out of the major indices and into specific sectors suffered, whereas major indices-such as the Tel Aviv 125, the S&P 500, the Nasdaq, or Germany’s DAX-performed exceptionally well.
"In sector-specific indices there are much wider gaps between peaks and troughs. Furthermore, they are less liquid than the major indices. You could withdraw NIS 2 billion from the Tel Aviv 125 index and the market would absorb it, whereas withdrawing NIS 200 million from the construction sector index would be a shock to the underlying securities."
Published by Globes, Israel business news - en.globes.co.il - on November 5, 2026.
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