Israeli global equities, as measured by the BlueStar Israel Global Index, declined more than 4% last month, continuing the pullback that began in September.
Israeli global technology equities, as measured by the TASE-BlueStar Israel Global Technology Index benchmark, under-performed the broader Israeli equity market for the first time in five months, giving up nearly 5% last month. BlueStar's Israeli equity indices performed in-line with other Israeli equity benchmarks such as the MSCI Israel and TA-100 indices.
Many of the themes and trends that BlueStar has highlighted throughout the second and third quarters continued into the fourth quarter. This included investor preference for domestically oriented sectors of the market over global-oriented sectors, health care continuing to under-perform, especially with the overhang of the U.S. elections, and investors positioning themselves for higher growth, higher inflation and higher interest rates.
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Charts courtesy of BlueStar
The cross-currents of economic growth, monetary policy developments, political/regulatory risk, sector rotation and technical analysis are extremely complex, dynamic and fluid, but, as always, there is a place or strategy for Israeli equities to take advantage of these developments. Overall, what BlueStar sees developing in global markets is a set-up for the next leg of this bull market cycle, which began in 2009.
We come to this baseline outlook predominantly as a result of developments in global monetary policy.
The tentative coming monetary tightening cycle looks like it is both in reaction to positive economic developments and a leading indicator of positive economic developments. The state of monetary policy is that interest rates in virtually all developed markets have been, are and will likely continue to remain below the equilibrium rate for several more years, even if one takes the view that the equilibrium rate is lower than before the Great Recession.