Although almost every year there are events that surprise market analysts, it can be presumed that so exceptional a year 2020 was not counted as possible scenario in any investment house research department.
The beginning of 2020 saw a wave of rises on the stock market, a continuation of the trend at the end of 2019, bringing the main stock market indices in Israel and the US to record levels, betraying nothing of the drama that would follow as Covid-19 spread to the West.
The spread of the virus and the fears of the economic damage it would do found swift and sharp expression in the financial markets, with stock indices in Israel and around the world plummeting, starting in February and continuing in March.
This was followed by a period of high volatility, which moderated in time, with markets stabilizing and some switching to a positive trend.
All this was against the background of the new state of affairs, massive government and central bank aid to economies and markets, while technology companies that actually gained form the crisis flourished.
Towards the end of 2020, the markets received another push, as several pharmaceutical companies published positive results of trial of Covid-19 vaccination trials, and vaccinations actually began to be administered to the public at the close of the year.
Despite the more encouraging end to 2020, the leading index of the Tel Aviv Stock Exchange, the Tel Aviv 35, shed nearly 11% of its value over the year, weighed down by financial, traditional energy, and real estate stocks.
Looking ahead, analysts are fairly optimistic about prospects for stock market performance in 2021, and see the leading indices rising and the local economy, which was battered in 2020, growing again.
Pooling the 2021 forecasts of the main investment bodies in Israel yields the following average projections:
1,650 points is the average forecast level of the Tel Aviv 35 Index for the end of 2021, meaning an 11% rise in the index over the year.
Among the forecasters, Tamir Fishman was especially optimistic, seeing the Tel Aviv 35 returning to its February 2020 peak, at around 1,750 points, 17% higher than the current level.
Migdal Capital Markets has a forecast of 1,720 points, implying a 15% rise, and Analyst forecasts 1,700 points, implying a 14% rise, while Halman-Aldubi sees a rise of about 12% to 1,670-1,680 points.
Psagot is one of the most pessimistic forecasters. Its analysts see little change in the Tel Aviv 35 Index this year, and estimate that it will stand at 1,500 points at the end of it.
Leumi Capital Markets, which forecast a rise of 10-15% in the Tel Aviv 35 to 1,650-1,720 points, says that "in comparison with other countries, stocks in Israel are not expensive", adding that "to judge from the recovery in stocks in most countries, local stocks are actually cheap."
8% is the average rise forecast for the S&P 500 index, which would take it to 4,030 points at the end of the year.
Here too, Tamir Fishman is on the optimistic side, with a forecast of a rise of 13-14% for the US index, to 4,220-4,250 points.
Other forecasters of a double-digit rise in the S&P 500 are Leader Capital Markets and Bank Hapoalim unit Peilim Investment Portfolio Management Ltd., which both predict a rise of 10% to 4,100 points. On the pessimistic side, Psagot again stands out, with a forecast rise of 4% to 3,900 points. IBI has a similar forecast.
Meitav Dash, which forecasts a 6% rise in the S&P 500 to 3,950 points, says, "The advantage of small cap shares can be expected to continue in the coming year," even though "the Internet giants stole the show." Meitav Dash says that small cap stocks stood out last year in the US and in Asia.
None of the local investment houses sees the Bank of Israel raising its interest rate above the current 0.1% in 2021. Almost all see the rate remaining unchanged, although Analyst has a forecast range of 0-0.1%.
"The near-zero interest rate environment will continued in the coming year," writes IBI Investment House, adding, "to the extent necessary, the Bank of Israel will mainly use expansion of existing programs, or the launching of new ones, to ease credit conditions, whereas the probability of the interest rate tool being used is low."
NIS 3.2/$ is the average forecast for the shekel-dollar exchange rate at the end of 2021, which is similar to the current rate.
"The dissolution of the Knesset and the third lockdown have not changed the trend of a strengthening shekel," Bank Hapoalim writes, and points out that "the shekel-dollar rate is below the level it was at in 2008, and is now approaching its level at the end of 1996… the sharp appreciation means a greater possibility that the Bank of Israel's interest rate will be lowered to zero in one of the forthcoming interest rate decisions."
Seven investment houses mention the banks or the financial sector in general as recommended for investment in the coming year. Real estate and associated fields such as infrastructure receive a similar number of recommendations, while six investment houses recommend the technology sector.
On infrastructure, Halman Aldubi writes, "Companies in this sector are benefitting from huge growth in budgets for mega infrastructure projects in the country" and that "the four large public groups report record orders backlogs… We therefore see continued double-digit growth, and estimate that 2021 will be another peak year in the infrastructure sector."
Published by Globes, Israel business news - en.globes.co.il - on January 3, 2021
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