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Half a year of losses: Our investment portfolio is a testament to the market situation - Walla! Of money

2022-06-02T07:02:33.158Z


Our investment portfolio has already lost a significant percentage of its value, similar to most investments in the capital market in recent months. How did this happen and how to continue investing in the face of a changing reality?


Half a year of losses: Our investment portfolio is a testament to the market situation

Our investment portfolio has already lost a significant percentage of its value, similar to most investments in the capital market in recent months.

How did this happen - and how to continue to manage the investment, given the complex geopolitical reality?

Roast Greenberg

02/06/2022

Thursday, 02 June 2022, 09:17 Updated: 09:57

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Inflation is rising and investments are plunging: 'The Race for Yield' concludes six months with a loss of about NIS 3.2 thousand, which is about 16% of the virtual fund with which Walla Money!

And Maariv Business began the decentralized investment in the markets and major currencies.



Most of the investment was pumped down with sharp declines in the main virtual currency exchange rates we examined, which have fallen by an average of 53% since the beginning of last December, along with a 26% drop in the US NASDAQ index, which represents the technology sector on US stock exchanges.



The only green light fund that our investment portfolio experienced was a 2.32% increase in the Tel Aviv 35 index, which represents the strength of the Israeli economy compared to other overseas economies, along with a 5.2% increase in the dollar against the shekel (after the former became an investment). Defensive in light of the declines in the markets), did not lead to the desired balance ..

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The declines since the beginning of 2022 have not missed the Tel Aviv Stock Exchange, which was the only bright spot in our investment portfolio (Photo: Reuven Castro)

The era of cheap money is over

Rafi Gozlan, chief economist at IBI Investment House

, explains that "by the end of 2021, the global economy was operating on the basis of price stability that lasted about a decade, and that base then began to be undermined.

Which



is leading the financial markets

down.



In the years 2020-2021, unusually large amounts of funds were transferred to financial assets that presented mainly a possibility for future profits, and without any proportion to the unreasonable values ​​given to the companies to which the funds were transferred.



This is one of the reasons why the most severe damage to the investment portfolio presented in your table concerns everything related to virtual currencies and the technology sector, which contains many growth companies that have presented a possibility for future profits.



These were estimated at high multipliers (years expected to reach future profitability) and led mainly the US indices to underperformance relative to Europe and Asia.



But in 2022 investors changed direction and began to steer their investments towards safer assets, alongside company shares showing present profits and business results.



If in the corona years all financial assets in world markets benefited from the inflow of funds encouraged by central banks and various governments, then designed to help economies continue to function during the Chinese virus crisis, we now see the opposite trend - financial assets suffer from rising interest rates and central bank activity.



"Hence, the higher the volume of funds flowing to certain sectors or stocks, the greater the volume of outflows of funds today."

After half a year, our portfolio shows only losses (Photo: None)

Gozlan also looks at what is happening in the world markets: "Inflation in the US is sharper than in the rest of the world, mainly due to the rise in the wage component, which is leading the US Federal Reserve to sharper and faster interest rate rises, which are also leading to stock market



declines . For marketable investments by central banks, which are trying to curb inflation through interest rate hikes, they also signal to



investors

that as long as price stability is not achieved, interest rate hikes will continue and the negative pressure on financial asset prices will continue.

The Russo-Ukrainian war makes it difficult for central banks to work, due to the lack of supply of food and energy goods, which, in part, castrates the solution of rising interest rates to rising inflation.



"This is also the reason why Europe continues to experience high inflation, which is basically experiencing an energy crisis that intensified with the outbreak of the war in Eastern Europe, along with rising food prices that began with post-Corona supply chain difficulties and intensified with the recent war."

Rafi Gozlan, Chief Economist of the IBI Investment House (Photo: Courtesy of the Photographers, Ilan Beshor)

The near future does not bode well for optimism

Gozlan also refers to other markets: in the East, however, the experienced economic reality is different;

Japan, for example, is hardly raising or planning to raise interest rates at this time, and is experiencing lower inflation due to the lack of influence on the part of what is happening in the world today on its economy.

But those exposed to the Japanese currency, the yen, suffered no less than the declines in the US stock markets, due to the weakening of the currency



. Its real estate, which weighs on the activity of its economy and will accompany it in the coming years.



This is in addition to the zero-stick policy that the Chinese regime enforces in the tightening, and charges high economic prices from the economy of the large industrial state in the East.

Chinese regulation is also not particularly friendly to some Chinese technology companies, and all of these together have led to poor performance in Chinese benchmarks.



Compared to the rest of the world's markets, Israel is showing an increase for the period examined by you, due in part to the fact that the problem of inflation is less in relation to those markets.

The performance of tradable assets in Israel was also good, despite the decline they experienced in the first quarter of the year, with strong growth among companies, especially those in the Tel Aviv 35 index



. On

the Tel Aviv Stock Exchange, and this time it actually contributed to us and led to a surplus.



But in relation to the dollar the trend in the opposite half year. This is mainly due to the strengthening of the dollar against the shekel,



Compared to real currencies, virtual currencies do not have a state economy that gives real currency value, so the term 'virtual' currency may be misleading and it is worthwhile to characterize them at this time as financial assets.



And as such, they have benefited from the lack of investment alternatives and cheap money in the markets, along with the growth companies in particular, and are now with them in the same boat that entered the whirlpool of declines.



It should also be remembered that above the field called virtual currencies still hovers a question mark concerning the need and manner of their use, and all these together lead to the markets' assessment that their low point, apparently, has not yet reached.



The near future does not look optimistic for the markets, as price stability has not yet been achieved and is not expected to be achieved at this time.

This assessment leads to the assessment of further interest rate increases, which will make the stock markets even more difficult.

But even in these times there are diverse investment options, and it must be remembered that the world has not stopped reigning, and that companies and economies continue to produce and profit. "

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Source: walla

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