Recently I had a serious conversation with a very close friend about the current situation and what the future might bring. He shared many real concerns ranging from the physical safety of the citizens of Israel, the rampant antisemitism, the potential increasing isolation of Israel as global support peters out, to the current economic situation and future of investments in Israel, and the projected price hikes due to the rerouting of shipping to avoid Houthi terrorism. Just listing all the above is enough to take us to a bleak place. However, there is a very big however too; we just need to be aware and recognize it.
Without in any way belittling my friend’s concerns I would like to share some positive angles to help reframe our perspective.
If I just start with the final point about the Houthis (how many people had even heard of them before they started launching their rockets during this war?), the US has put together a 10-nation coalition, with additional members who do not want to be named publicly. The impact of this disruption on international trade is very significant which makes a solution more likely than if it only impacted on Israel. To date, in response to the naval terrorism, the US and Britain have attacked some sites in Yemen.
Additionally, we are experiencing levels of unity that surpass anything in our recent past, both within Israel and among Jews globally. The arguments that threatened the very fabric of our society have been put aside, and we need to focus on maintaining our current cohesion, despite our differences. The frightening levels of blatant antisemitism worldwide are encouraging many Jews abroad to crystalize their plans and make aliyah. They are coming to the realization that although on paper Israel might seem to be a dangerous place, currently at war and surrounded by enemies, it’s our home and the rest of the world is not the safe haven that they may have considered it to be.
On an economic front, many of the difficulties may turn out to have silver linings with necessity being the mother of invention, as industries are being developed, specifically but not limited to, those related to military and cyber security needs. The current war is encouraging Jews and those connected with Israel to invest in our industries (in addition to the significant donations which are part of the war effort). This can translate into higher employment and a thriving economy, which contrasts to the period before the war when our disunity caused a withdrawal of investments. Add to that equation the lower inflation and interest rates, and the expected election year growth in the USA (our largest and most significant partner), it all adds up to increasing economic stability and growth in the long run.
As I wrote a few months ago, Israeli investors are quite resilient and so while markets went down sharply after October 7th, November saw the Israeli markets correct and go back upward. They are now above stock market pre-crisis prices as we approach the end of the year. Our pensions look on target for a very decent year, largely correcting the losses they suffered in 2022.
All this goes to prove how critical it is to have a consistent investment plan that doesn’t adjust every time the wind changes direction. Anyone who pulled out of the market after the initial 10-15% loss in the first few weeks after October 7th, is unfortunately looking at very different end of year returns.
That is not to say that everything always works out for the best. Sometimes it can take much more time to see market corrections and not all situations turn out positively. When the Russian financial crisis occurred in 1998, there were real defaults on debt, even though there was a major world power backing that debt. When the Japanese property market crashed in the early 90s it caused decades of losses from which they still have not recovered. These are just two examples of events that did not bounce back so quickly and impacted on investors in the long run.
But these events are the small minority of world events that caused long term substantive damage to investors and economies as a whole. The large majority of all forecasted catastrophic events, that were supposed to crash markets (especially the major western markets), were just that – forecasts that impacted on the markets but did not cause a fundamental shift in the basic premise that markets go up. Investments gain in value over time and there are consistent ways to diversify and protect your investment and see growth in the long run. That is the critical point that you need to focus on when planning for your future and making significant investment decisions.
So where will Israel and the Israeli economy be in one year, 2 years or 5 years from now? No one can tell for sure, but I’d rather live as an optimist, and believe that G-d promised our return to His land for a good reason, and that we will continue the economic miracle we have seen over the last 75 years. And thus, I pray for the safety of our nation, our soldiers and hostages, and I choose to be an optimist in all realms of my life, both for my current mindset and for the likely long-term gains that this optimism will bring with it in the long run.
If your finances have been affected by the war, we would like to do our best to help you regain financial clarity, be aware of what aid you may be entitled to, and help you structure your finances going forward in these uncertain times.
If you think we can help you, please email email@example.com or call 02-991-0029 to arrange a convenient time for a free, brief consultation with one of our financial professionals.