Central banks around the world have increased interest rates in a bid to rein in inflation. Israel was no exception, as the Bank of Israel delivered the biggest rate hike in two decades with a .75% increase on August 22, 2022. However, despite the consensus that there are more hikes to come in Israel and around the world, Israel stand “far from the madding crowd” (Jeffries, Israel Equity Strategy, 25 August 2022).

According to Jefferies equity research (25 August 2022), Israel’s rate hikes have been well-timed and deliberate, and were implanted into a strong economy at full employment. This sets Israel apart from the US and the rest of the developed world economy, potentially resulting in an attenuated monetary policy impact. Israel’s yield curve is “one of the few that is positive and has actually shifted upwards over the past month”, and “moreover, nominal GDP is well above nominal interest rates, ensuring that profits are likely to remain resilient (Jeffries, 25 August 2022). 

Israel’s market return is also now diverging from the rest of the developed markets outside North America. At the end of Q2 2022, MarketVectorTM reported on the underperformance of Israel equities, as defined by the BlueStar® Israel Global Index (BIGI®) – down 20% vs MSCI EAFE down 15% (MarketVectorTM, Israel Equity Review and Outlook, Q2 2022). But what a difference a month makes!   In the one month ending 24 August 2022, BIGI® is up 10% vs MSCI EAFE up 7%, and BIGI® is now outperforming MSCI EAFE on a YTD, 1Y, 3Y, and 5Y basis. 

Exhibit: Israel vs Developed Markets ex-North America Index Performance

INDEX

1M

Q2 2022

YTD 2022

1Y

3Y

5Y

BlueStar® Israel Global index (BIGI®)

9.90%

-19.70%

-10.88%

-7.59%

35.51%

65.19%

MSCI EAFE

7.20%

-15.37%

-19.11%

-14.46%

5.04%

4.99%

Source: MarketVector IndexesTM as of August 25, 2022.

MarketVector IndexesTM (and previously BlueStar) has produced monthly updates on the Israeli market since 2012. The BlueStar® Israel Global Index (BIGI® or BLS and BLSTR Index on Bloomberg) is the broadest and deepest benchmark for Israeli equities trading worldwide, whether listed in Tel Aviv, New York, London, Singapore or Australia. BIGI® is tracked by a NYSE-listed ETF, as well as an Israel domiciled index fund tracking BIGI®.

 

For more information about Israel, read the latest BlueStar Israel Equity Review and Outlook Q3 2022.

 

About the Author:

Joy Yang is Global Head of Index Product Management at MarketVector IndexesTM. She is responsible for managing MarketVector IndexesTM products and services to accelerate innovation in financial index design and adoption. Joy brings more than 25 years of investment experience to MarketVector IndexesTM, having led teams delivering index and quantitative-active investment solutions at Arabesque Asset Management, Dimensional Fund Advisors, Vanguard, Aberdeen Standard Investments, AXA Rosenberg, and Blackrock. Joy has an MBA from the University of Chicago Booth School of Business, and a BS in Electrical Engineering from Cooper Union’s Albert Nerken School of Engineering.

 

For informational and advertising purposes only. The views and opinions expressed are those of the authors but not necessarily those of MarketVector Indexes GmbH. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index. MarketVector Indexes GmbH does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that is offered by third parties and that seeks to provide an investment return based on the performance of any index. Inclusion of a security within an index is not a recommendation by MarketVector Indexes GmbH to buy, sell, or hold such security, nor is it considered to be investment advice.