1The events that will affect the trading week
Another week in the markets will open with a sign of great uncertainty as to the direction in which the conflict between the US and Iran is going. Tensions are increasing, reports of preparations for renewed hostilities are multiplying, and there has also been a rhetorical escalation between the parties – but on the face of it, it seems that investors are still pricing in de-escalation and choosing to focus most of their attention on the companies’ profits.
The report season in the US pushed the American stock market to new highs this weekend, during which reports were published by five of the “Magnificent Seven” – Alphabetical , Amazon , Meta , Microsoft anddark – which all exceeded analysts’ forecasts, but the market’s reaction to them was mixed. This is also the second week in a row in which the rally on Wall Street seems to be disconnected from the high oil prices, which remain above $100 per barrel.
The stock market in Tel Aviv also registered a new record, despite the fact that the cease-fire established between Israel and Lebanon is not enforced in practice, and that the fighting against Hezbollah continues to be conducted on the northern border.
Investors will concentrate this week on data from the employment market, and especially on the employment report of the American economy for the month of April, which will be published on Friday; On Thursday, in Israel as well, data from the manpower survey for the month of March will be published, in addition to the business trends assessment survey for the month of April, which will provide a snapshot of the sentiment among business owners.
At the same time, the report season on Wall Street will continue on its course, with reports from two major players in the field of AI, Palantir and-AMD alongside huge corporations like Walt Disney andMcDonald’s .
2Goldman Sachs: “We estimate that the market is going to let off steam”
The dual shares will return to Tel Aviv with a negligible negative arbitrage gap of less than 0.1%. Camtech andNova are expected to decrease by about 1.7%, while Formula systems is expected to weaken close to 7%. on the other hand, nice is expected to jump at the beginning of trading by about 8.2%, after jumping by more than 10% on Wall Street last Friday, against the background of the positive momentum recorded in the software shares.
The stock exchange in Tel Aviv ended the past week in the green. The TA 35 index rose by about 1.4%, the TA 90 index climbed by about 5.1% and the TA 125 index climbed by about 2.3% to a new all-time high. The stock market also closed the month of April with gains, when the TA 35 index jumped by about 6.7% and the TA 125 index climbed by about 7.4%.
The industry index that starred in the past week is the cleantech index, which jumped about 5.1% in the past week and over 44% since the beginning of the year – double the return that the Tel Aviv 35 index produced during this period. Investors are betting that renewable energies will become more relevant, due to the fact that they are immune to supply shocks, such as the one caused by the blocking of the Strait of Hormuz.
After that, the construction index stood out for the positive, which rose by about 4.5%, possibly against the background of growing estimates among economists that the Bank of Israel will lower interest rates at a higher rate than what the markets are pricing – which in turn will ease the financing costs of the developers. On the other hand, the banks index fell by about 1.2%, and was among the few that ended the week in the red.
As mentioned, the stock exchange in New York also closed a positive week. The S&P 500 and Nasdaq climbed about 0.9% and about 1.1%, respectively – both to new all-time highs – and also posted their strongest month since 2020. The Dow Jones added 0.55%.
Bloomberg reported at the end of the week that after the new highs on Wall Street, concerns are growing among investment managers about the possibility that there are few investors left who can buy. According to the report, hedge funds and commodity trading consultants are reducing their purchases, while the Goldman Sachs stock positioning index indicates a level of density that has hardly been seen in the last five years.
Traders at Goldman Sachs, including Gail Hafif, Lee Coppersmith and Brian Garrett, wrote in a message to investors that “we believe that the market is expected to release steam in the near term, cleaning up the foam that accumulated during the rally to all-time highs.”
Chris Murphy, co-director of derivatives strategy at Susquehanna International Group, told Bloomberg that “markets remain resilient, but positioning is less supportive and investors are increasingly focused on downside risks, including possible pressure on profit margins if oil prices remain high. This caution is reflected in options flows, which signal less appetite to chase further gains.”
3Why is Wall Street rising along with oil prices?
Against the background of the sharp increases recorded on Wall Street over the weekend (Thursday and Friday) and the weakening of the dollar in the world, the shekel strengthened against the American currency by about 1.5% and its continuous rate was locked at the level of 3.94 shekels.
Oil prices fell sharply, after Brent oil surged in the middle of the week to a level of $126 per barrel – the highest since the outbreak of the war against Iran. At the end of the week, Brent crude closed around $108 per barrel, while US crude closed around $102. Effectively, the Strait of Hormuz remains closed, with President Trump signaling in recent days that he is expected to extend the naval blockade on Iran until it agrees to meet his demands on the nuclear issue.
Reuters reported that the Organization of the Petroleum Exporting Countries OPEC+, from which the United Arab Emirates withdrew last week, agreed in principle to increase output targets for June by approximately 188,000 barrels in June – the third monthly increase in a row. However, the increase is expected to be mostly symbolic, until oil shipments through the Strait of Hormuz resume. A number of senior officials at oil companies and global oil traders said to Reuters that even when shipments resume, the flow of oil will take several weeks if not months to stabilize.
Paul Marino, VP of Revenue at Themes ETF’s, estimated that one of the reasons for the durability shown by the American stock market, despite the high oil prices, lies in the fact that the USA is the largest oil producer in the world, so that an increase in prices actually supports the economy through the energy sector.
Marino also attributed the phenomenon to the American market’s focus on technology, automation and renewable energies. “As long as the AI revolution continues and the American consumer continues to spend money – the market can absorb oil at $100 even for a long time. But if prices remain high beyond 2026, the pressure will begin to permeate through inflation, damage to demand and erosion of margins,” he wrote.
The price of gold continued to be under pressure, amid fears of higher inflation, and closed another negative week, with a decrease of about 1.5% to the level of $4,615 per ounce. Gold has traditionally been seen as a hedge against geopolitical uncertainty, but it tends to underperform in high interest rate environments as it loses its edge over interest-bearing assets, such as bonds.
Giovanni Stovano, an analyst at UBS, told CNBC that “gold continues to be negatively correlated with oil in the short term, as it affects expectations for interest rate cuts.” However, he also provided a positive outlook for the precious metal in the next 6-12 months. According to him, “Uncertainty regarding the mid-term elections in the US, expectations of a continued weakening of the dollar and the decrease in real interest rates (due to interest rate cuts by the Fed), will likely support demand for investments, along with continued demand from central banks.”
In his estimation, these factors may push the price of gold to the level of $5,900 per ounce by the end of 2026 – which would reflect an upside of over 25%.
4Economists estimate: an interest rate cut is possible already this month
Leader Capital Markets economists estimate in their weekly review that the sharp strengthening of the shekel against the basket of currencies (+1.6% in the past week and +5.4% since the beginning of the war) is expected to become a more central consideration in the monetary policy of the Bank of Israel. “Such a sharp appreciation in the shekel constitutes an anchor that supports the inflation target, also against the background of rising energy prices and wage pressures,” they wrote.
Blaider added that a scenario of a positive end to the conflict may lead to a further reduction of the exposure of the institutional bodies to foreign exchange, thus supporting the continuation of the shekel’s strengthening trend. In their estimation, “assuming progress in the geopolitical arena, there is a probability of an interest rate cut in one of the two upcoming decisions.”
In the weekly review of the financial division at Bank Hapoalim, the economists wrote that “Opposite forces affect inflation, and this complicates the decision of the Bank of Israel. On the one hand, the sharp increase in the shekel exchange rate moderates price increases, and on the other hand, the increase in fuel prices, the global environment, and the risk that the war will be renewed increase the risks of inflation.”
The economists added that “the derivatives market expects inflation at a rate of about 2% in the coming year, but the level of certainty in this number is low – the renewal of fighting may change the picture. Also, there is a question mark surrounding the policy of the new government that will be established, and if it chooses to raise taxes in order to reduce the deficit. In terms of the foreign exchange market, the Bank of Israel would probably be happy to reduce the interest rate, but in terms of inflation it may be better to wait, especially in light of this that even in the US there are no expectations for an interest rate cut this year… If the ceasefire is maintained, it is likely that we will see a rapid decline in the markets’ expectations for inflation. In this scenario, the interest rate cut will take place this month, but as the fighting resumes, the interest rate cut will be postponed. The markets expect one rate cut this year and another in the first half of 2027.”
5Sell in May and go? “Random like flipping a coin”
The well-known saying on Wall Street, “Sell in May and go away”, has become an investment strategy for many, based on the assumption that the summer months in the American stock market are traditionally weak. While at the beginning of May this year, against the background of increased geopolitical uncertainty, the temptation to sell may be greater, recent tests conducted by two central investment banks cast doubt on the viability of this approach.
BJ. times. Morgan pointed out that in the last decade, those who decided to sell in May missed out on considerable returns. The average yield of the S&P 500 was 1.5% in May and 1.9% in June, while in July it was even higher and stood at 3.4%.
Deutsche Bank also conducted an examination on the subject based on data from 1973, which revealed that the selling strategy in May only beat the market in 22 of the last 53 years. “The strategy offers no statistical advantage over ‘hold and buy’ and its success is as random as a coin toss,” the bank wrote.
