Study: Stock exchange signals lack of electoral decision

A study by the Tel Aviv Stock Exchange's research unit, conducted by economist Nisan Avraham, indicates a link between the performance of the Israeli stock market and political uncertainty surrounding elections. The research shows that in the three months before inconclusive elections, the TA-125 index fell by an average of 5.3%, compared to a decline of only 0.2% before elections that led to the formation of a government. However, after election day, the market tends to recover, and the gap closes within a few months.

A study by the research unit of the Tel Aviv Stock Exchange, conducted by economist Nisan Avraham, examines the connection between election results in Israel and the performance of the local stock market. The study found that in the three months before elections that did not result in the formation of a government, the TA-125 index fell by an average of 5.3%, compared to a decline of only 0.2% before elections that led to the formation of a government. So far, the index has fallen by 5.9% since July 27. However, after election day, a mirror image emerges: one month after elections, the index rose by an average of 2.3% in inconclusive rounds, compared to a decline of 0.7% in decisive elections. After five months, almost no gap remains between the two groups. The study indicates that the market prices political stagnation in advance. Additionally, it found that in the 12 months following ten election rounds examined, the TA-125 rose by an average of 16.4%, compared to an average annual return of 11.5%. The stock exchange refrains from a definitive conclusion due to global influences. Among institutional investors, there is concern about an endless cycle of elections, as occurred between April 2019 and March 2021. Uncertainty also affects the shekel, which strengthened by 1.4% in the year before elections, less than the long-term appreciation rate.