Israel’s economy will grow by about 3 percent in 2013 as the US and euro bloc experience a gradual recovery, according to Merrill Lynch Wealth Management.

Recent unexpected geopolitical tension should not cause Israel any long-term damage, Bill O’Neill, Merrill Lynch’s chief investment officer for Europe, the Middle East and Africa (EMEA), said Monday at a press conference in Tel Aviv.

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He also forecast that the Bank of Israel will not raise interest rates soon, especially with the approach of elections in January and the sensitive political situation.

Turning to strategy, O’Neill said investors would begin to show more faith in stock markets next year. Merrill Lynch’s research division believes investors will favor stocks over bonds from 2015 and beyond, he said, as the bull market in bonds comes to an end.

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