Pioneer Capital Shifts Strategy: Why Israel's Market Peak Calls for US Tech
Pioneer Capital investment head Shmuel Ben Arie advises shifting portfolio weights from Israel to US stocks and AI, citing high local valuations and election uncertainty.
Shmuel Ben Arie, director and head of investments at wealth management firm Pioneer Capital, has shifted his market outlook. While he previously favored Israeli equities—highlighting Teva's 120% surge and insurance stocks rising between 60% and 96%—he now advises reallocating the bulk of investment portfolios to the United States.
"I started the year with a stock portfolio comprising 65% exposure to Israel and 35% abroad," Ben Arie explains regarding the strategic shift. "Following such a sharp rise and the inflation of the local market, we are taking profits and moving primarily to US stocks."
Ben Arie notes that from 2013 through the end of 2023, the Israeli market traded largely sideways. Momentum shifted following the pager explosions in September 2024 and Operation 'Am Kalavi', which sparked optimism and economic expansion tied to the Middle East and the Abraham Accords. Consequently, local equities jumped over 100% through March. Today, Tel Aviv stocks are no longer cheap and companies trade at high multiples.
The Need for a Catalyst
"To continue rising, the market needs a catalyst or a positive event," Ben Arie says. Looking at the local economy, he sees none on the horizon. Regarding upcoming elections, he remains skeptical: "For anyone banking on a stock market boom, I am not optimistic, because at least according to polls, post-election certainty is far from guaranteed."
Conversely, the US economy continues to show extraordinary strength. "The US economy is growing quarter after quarter, barring a single quarter, and has maintained full employment for 61 months, which is nearly an all-time record." Ben Arie also believes massive investments in infrastructure and artificial intelligence will persist due to US competition with China.
Portfolio Allocation Strategy
Ben Arie recommends favoring the US for equity exposure, while keeping fixed income local. For conservative investors, he suggests allocating 15% to US equities—focusing on tech giants and AI—and 5% to Israeli stocks, excluding real estate. He allocates 50% to corporate bonds with a 2-3 year duration, 20% to Israeli government bonds with a 7-10 year duration, and the remaining 10% to a money market fund as dry powder.
"Whenever the market isn't at a low, I keep 5% to 10% in a money market fund so that if an unforeseen crash occurs, we are ready with ammunition to seize opportunities," he explains.
For aggressive portfolios, he foregoes bonds in favor of 60% in US stocks focusing on technology and AI, and 30% in Israeli dividend-paying stocks, reserving 10% for money market opportunities.
Recommended Picks
In the local market, Ben Arie favors companies with strong cash flow and dividends. He recommends Ratio Energies for exposure to the Leviathan gas reservoir, offering a 7% dividend yield and pipeline expansions. In software, he points to Formula Systems due to its cash reserves and subsidiary valuations. He also highlights defense firm Plasan for its ballistic protection manufacturing and attractive valuation.
In the US, Ben Arie emphasizes semiconductors and technology. Alongside Israel's Tower Semiconductor, he recommends Broadcom, memory chip maker Micron Technology, Meta Platforms for its data dominance, nuclear energy utility Constellation Energy (CEG) to power AI infrastructure, and defense giant Lockheed Martin amid rising global demand.
