The Shekel continues to strengthen against the dollar, gaining 16% in the past 21 months. Israeli investment account holders enjoyed this benefits as their holdings are in Shekels.
The Israeli stock market outperformed Wall Street yet again in 2010. The Tel Aviv 25 Index returned 16.3% vs. the Dow Jones Industrial Index, which returned 9.75%. Over the past 5 years, the TA-25 has returned a 56% gain vs. a paltry 2.5% gain for the S&P 500 Index.
In economic news, Israel's Gross Domestic Product (GDP) rose 4.5% in 2010, almost double the expected OECD average of 2.7% for the year. Also, Israel's average unemployment rate of 6.7% in 2010 is well below the OECD average of 8.3%, and the U.S. rate of 9.6%. These factors lead to a more robust economy and recovery, which is reflected in the out-performance of the Israeli Shekel, stock and bond markets.
In real estate news, the government's efforts to bring down runaway housing prices (to keep inflation under 3%) seem to be working: the Ministry of Finance announced that median home prices dropped 7.4% in 2010.
Israeli flagship generic drug maker Teva Pharmaceutical rebounded off its 20-day Moving Average to gain 5% so far in January, 2011. See our article Good Time to Buy TEVA stock?
Israel's Central Bank raised its interest rate to 2.25%, making Israeli government and corporate adjustable-rate bonds held in a Shekel account even more attractive. The 16-year fixed-rate government bond now earns 5.4% (the 10-year U.S. Treasury earns 3.4%).