After an abnormal year, provident fund yields and advanced training in 2020 remained normal

The year 2020 will enter the books of economic history, and not only, as the year of the corona. First and foremost, the epidemic harmed public health, but its impact on the Israeli and global economy did not go unnoticed either. The plague broke out with unprecedented intensity and speed, initially in China but from there spread to the entire world. The health crisis led to significant steps aimed at taking control of the morbidity level and within a short time the global economic engines stopped. The world is closing. On the one hand, the aviation, hotel, restaurant, entertainment and other industries were almost completely closed. People locked themselves in their homes, and work began from home. The offices were left mostly empty. Starting a global race to find a vaccine for the disease. On the other hand, technology has advanced by leaps and bounds, improving its capabilities and apparently shortening ranges of many years ahead.

The plague has so far claimed the lives of nearly 1.8 million people. About 85 million people have been infected with the disease. Most of the world’s economies have fallen into recession, unemployment has skyrocketed, and entire industries are in the most severe crisis in human memory.
From an economic point of view, the crisis has been addressed in most developed countries by a combination of very broad fiscal and monetary policies.
Governments have increased the deficit and provided grants to mitigate the loss of disposable income of laid-off workers or workers who have gone to the IDF.

The plague has created an acute and unexpected crisis in global growth rates. In 2020, the world economy is expected to shrink by a sharp rate of more than 5% and in Israel by about 4%.
In Israel, the spirit of the upcoming elections is jeopardizing the recovery from the crisis. The country is still working with a budget set in 2018 which is not adjusted for the consequences of the corona and getting out of the crisis. The unemployment rate is at a high level of 14% and Israel’s credit rating is in danger, even if not immediately. Despite all this, the financial markets have risen sharply and created a disconnect between the so-called “Main Street” – the real economy and “Wall Street” (see below).

Thanks to this, the savers in the provident funds and pension funds in the general track, where the share rate stands at about 40%, kept their savings, and even achieved a very handsome positive return in this challenging year. As stated, in our estimation, in 2020 an average return of approximately 4.7% was recorded in the provident funds. Yields were mainly due to price increases recorded in world stock markets (led by the United States). The dollar moderated yields in everything related to investments by institutional investors abroad. (For details of the returns of the indices – see the table).
Note that this year could have looked completely different had it ended in March 2020, after the sharp declines that began towards the end of February 2020 and continued strongly in March. At the end of the first quarter of the year, provident fund savers lost about 10.7% of their savings (see details of monthly returns in 2020 in the appendix). From such a deep minus, the industry managed to move to a handsome plus of 4.7%.

Summary 2020

According to Meitav Dash, a return of 4.7% for the general provident funds.

Global stock markets have shown a generally strong positive trend.
In the US: Appropriate price increases, with large gaps between the Dow Jones index, which rose by only 7.2%, and the Nasdaq index, which rose by a very sharp rate of 43.6% !!!, with the S&P index rising 16.3 %.
In contrast, in Europe there was a mixed trend with relatively moderate increases and decreases: the German DAX index rose by 3.5%, the French CAC fell by 7.1% and the Eurostoxx 50 fell by 5.1%.
In Japan: The Nikkei rose 16.0%. The global index of emerging markets rose by 15.9%.

All these in currency terms of those countries. The weakening of the dollar against the shekel, of course, detracted from the shekel yield.
There was a mixed trend in the stock market in Israel, with very significant differences between the various indices: the Tel Aviv 35 Index decreased by 10.9%, the Tel Aviv 125 Index decreased by 3.0%, while the Tel Aviv 90 Index increased by 18.1%, and the Over-Index 60 rose by 15.6%.
A mixed trend was recorded in corporate bonds: the Tel Bond 20 Index and the Tel Bond 60 Index decreased by 0.2% and 0.1%, respectively, while the Tel Bond 40 Index increased by 0.1%. Non-rated corporate bonds (and have no index) rose 3.2%. The entire corporate bond index rose 0.6%.
The government bond index rose by 1.2%.

Yields January-December 2020

Summary of the month of December 2020

Meitav Dash estimates that the provident funds and large general study funds will show a positive nominal (gross) average return of 1.8% in December 2020. This expected return also represents the picture in the industry as a whole, with the yield range of all funds expected to range very widely between a return of 1.0% and a return of 2.5%.

In December, the stock markets (in Israel and around the world) and corporate and government bonds in Israel acted as a positive factor in fund yields.

Global stock markets showed price increases.
In the US: A nice positive trend when the Dow rose by 3.3%, the Nasdaq rose by 5.7%, the S&P rose by 3.7%.
Exchange rates also rose in Europe: the German DAX rose by 3.2%, the French CAC rose by 0.6% and the Eurostoxx 50 rose by 1.7%.
In Japan: The Nikkei rose 3.8%. The global index of emerging markets rose by 7.2%.
All these in currency terms of those countries.

The stock market in Israel also saw price increases: the Tel Aviv 35 Index rose by 2.5%, the Tel Aviv 125 Index rose by 3.6%, the Tel Aviv 90 Index rose by 6.3% and the Over 60 Index rose by a sharp 8.5%. %.
The local corporate bond showed a positive trend. The Tel Bond 20 index rose by 1.2%, the Tel Bond 40 index rose by 0.9% and the Tel Bond 60 index rose by 1.0%. The unrated bonds fell by 0.3%. General corporate NIS increased by 0.6%.
Government bonds recorded a positive trend with an increase of 0.5%, with CPI-linked bonds rising by 0.8%, while shekel-denominated bonds rose by 0.3%.

December 2020

Monthly returns in 2020