The investment manager who marks 2 problematic sectors and one that “must be in”

However, he mentions the context, when “we are after a return of 130% since Operation Beeper (against Hezbollah in September 2024, NA), and it is natural that there will be profit realizations.”

Returning to the beginning of our discussion on the market, he testifies that “until the age of 20, I didn’t open the economics section of the newspaper and I would go straight to sports. At a certain point, precisely because I wasn’t interested in it, I told myself that I wasn’t ready to be ignorant on the subject, and I decided to study it. The other way around.” Later the field became his career. Danino started as an options trader from UF in 2004 at Granite Financial Instruments and joined Mizrahi Bank’s ‘Etgar’ in 2011. In 2015 he was appointed the company’s chief investment officer. Last year he even completed official certification as a real estate appraiser – “a field that is also very appealing to me, and will add to my abilities in relation to investment management.”

Despite the volatility in the Tel Aviv Stock Exchange, Danino is confident that the increases will continue. There is a decrease in the risk premium, and the Middle East is also still changing and shaping before our eyes, with Israel’s involvement.”

I see the shekel getting stronger

Recently, the shekel has changed direction and weakened against the dollar to a rate of 3 shekels, but Danino is convinced that it will strengthen again: “The surplus and the balance of payments, as well as the high economic activity in Israel, will continue to strengthen the shekel in the long term. It will move more towards a prefix of 2 shekels to the dollar than to 3”.

When he broadens his view to the world’s macro arena, Dino is ambivalent. “Except for the companies that grow and climb, because they benefit from the investments made by the giant companies in artificial intelligence (AI), the other parts of the US economy are faced with high government debt, sticky and high inflation. This means an erosion of consumer power,” he says. “The Fed (central bank) needs to raise interest rates and is already late in its response. If he does not raise it in the upcoming decision in July, he will have to raise it at a higher rate in the future. The delay is not good for the markets.”

But he draws encouragement from the AI arena, where he estimates that “we are still at the beginning, perhaps a third of the way through, of a powerful cycle in investments in the field that will last until 2030, with huge investments in data centers but also in infrastructure and hardware. But this comes at a time when there is high inflation and interest rates that are expected to remain high for a longer period of time. In other words, the entire AI ecosystem could fall apart if demand from end users does not arrive, or is weak It is also possible that the companies in the field will have to lower prices. That is, the model of OpenAI and Anthropic – which are talking about revenues of 250 billion dollars in 2030, is not unreasonable but very optimistic.”

“The place to be”

Danino also fears the concentration in the American indexes and those in the Asian stock exchanges. “All the return in the S&P 500 index this year came thanks to three companies: Micron, Intel and AMD,” he says. “Without them, the return would have been negative. Growth is concentrated in a fairly limited number of companies. Also in Asia – the entire return of the emerging markets index, 30% from the beginning of 2025, is due to Samsung and SK Hynix from South Korea and TSMC from Taiwan.”

So why not wait outside the markets? According to Danino, “We are not in the business of scheduling. We are always in the market.”

When we ask our client to put together an investment portfolio, he offers a solid investor exposure of 6% to stocks in Israel and 9% to stocks abroad. The proposed debt component consists of 15% in index-linked Israeli government bonds in the MHA (average life span) 3 years and 25% in shekel government bonds (MHA 6). Another 5% in US government bonds. Yes, he allocates 40% to bonds Conglomerates in Israel with equal distribution (contiguous/shekel).

For an aggressive investor, he suggests allocating 25% to stocks in Israel and 35% to stocks abroad. He allocates 15% to index-linked corporate bonds in Israel and 20% to shekel corporate bonds. Here, too, he allocates 5% to US government bonds.

As for the sectors, Danino suggests in Israel and abroad to give overweight to banks and finance stocks. “If we are going to higher interest rates, and maybe slightly higher inflation in the short term, then the finance sector is the place to be. Also the fact that the yield curve is becoming steeper is good for the banks.” Also in Israel, he recommends the infrastructure sector which “should get a boost from the changes in the Middle East”, and suggests looking for interesting stocks in the technology sector.

Two sectors to stay away from

Abroad (mostly in the USA), he also suggests exposure to the health sector, which “seems more attractive, as a result of the combination of pricing and momentum. In the last two weeks, we see that investors are exiting growth companies and high multiples, and looking for more favorable pricing, and the health sector offers that.”

In addition, he recommends abroad the technology sector, which “has already swelled to 40% of the weight of the S&P 500, but is recommended due to the same cycle of investment in AI in the coming years. Even in the long term, those who stay in this sector will enjoy an excess return, only in the short term the volatility is still here.”

Danino estimates on the other hand that there are two sectors that are still too expensive. In Israel it is the insurance that is “still a bit expensive even after the drop in the last month, due to the realization of profits, but positive for the long term”.

In the US, the telecommunications services sector receives insufficient weight from it. “It is something to be careful of. Since the beginning of the year the industry has decreased by 0.4% while the index has increased. There is a lack of performance in the sector, and also two stocks make up about 40% of it, Google and Meta. The rest are traditional media companies, which are fading away in the age of AI. So in the short term I expect the sector to underperform. And Google and Meta are all exposed anyway, and they are in the investors’ portfolios through the indexes.”

The aforementioned does not constitute investment advice or marketing that takes into account the data and the special needs of each person