Remove Funds from Checking Account: Today’s Most Fascinating Investment Avenue

Remove Funds from Checking Account: Today’s Most Fascinating Investment Avenue

Investors who have chosen long-term savings routes had a reason to smile at the end of the month of January. According to a forecast published by the investment house Meitav, general track savers saw a positive return of 0.2%, equity track investors enjoyed an increase of 0.5%, and those who invest overseas in the American S&P index saw their portfolio increase by 1.9%. This follows a positive year in 2023, which saw an increase of over 9% in general tracks and 15% in equity tracks.

The American market was primarily responsible for the return in January, with the S&P 500 index rising by 1.6%, the Nasdaq by 1%, and the Dow Jones by 1.2%. In contrast, the Tel Aviv Stock Exchange presented a mixed trend, with a decrease of 1.8% in the Tel Aviv 35 index, a decrease of 1.3% in the Tel Aviv 125 index, and an increase of 0.4% in the Tel Aviv 90 index.

January could have been even more positive if not for the interest rate decision of the American Federal Reserve (Fed) on the last trading day of the month. The decision left the interest rate unchanged for the fourth consecutive time, but it was the forecast from the bank’s chairman, Jerome Powell, that surprised the markets. Powell does not expect an interest rate cut even at the next Fed meeting in March, explaining that inflation is still higher than its target range, so lowering the interest rate too early would be dangerous.

Despite this, February started positively in the markets, with the S&P 500 index increasing by 2.3% and the Nasdaq index rising by almost 3%.

Withdraw Money from Checking Accounts

The large technology stocks, known as the “Magnificent Seven” (Microsoft, Apple, Google, Amazon, Envida, Tesla and Meta), have been leading the positive trend on Wall Street. These stocks are trading at all-time highs, and investors are questioning if they are already too expensive for investment.

Investment managers suggest that investing in big companies can continue, but funds should also be diverted to other areas from channels that do not yield returns, such as cash. Israelis still have more than NIS 350 billion in current accounts, and investment managers agree that this is the worst possible option, especially during inflation.

Daria Ochnik, director of the local branch of the global investment company Neuberger Berman, suggests that “many investors still have cash balances, but the markets are already pricing in a significant drop in short-term interest rates. We need to take advantage of the attractive yields in bonds before they also fall. A slowdown in economic growth makes us cautious about assets whose pricing is relatively high.”

So, where should one invest? Neuberger Berman advises investing in assets that have recently yielded low returns, such as small companies in the US and commodities.

Avoid Volatile Stocks

Neuberger Berman believes that stocks that have lagged in the past year can benefit from the inflow of investors’ money, especially if inflation decreases and the US economy slows down without a recession.

Which sectors should one invest in and avoid? Neuberger Berman recommends small stocks on Wall Street, stocks of industrial companies, yielding real estate, the health sector, value stocks and the stock markets in Japan. Conversely, they advise avoiding exposure to areas such as banks, transportation and especially the field of semiconductors.

Invest in Commodities and Bonds

The commodity sector is currently attractive, according to Neuberger Berman. They believe that commodities are a hedge against political and geopolitical events and unexpected spikes in inflation.

In anticipation of a gradual decrease in inflation along with a slowdown in growth in the US, without a recession, Neuberger Berman economists recommend investing in large parts of the bond market, especially short to medium-term bonds where the interest rate is still high.

“Government bonds are considered relatively safe assets, so the risk of losses is low. Short-medium term government bonds still offer a higher return than expected in the future. The Fed is expected to start lowering interest rates during 2024, and when that happens, these bonds will be less attractive to investors. Therefore, if the goal is a safe investment with a relatively high yield – you should consider investing in them now,” concludes Ochnik.