Volatility on global markets is expected to continue to leave a stain on the local arena, as well, raising risk levels in the coming days and months although optimism remains for stabilization in the longer-term. "The correction in international markets triggered by the crisis in the subprime mortgage financial sector in the US, which directly affects the Tel Aviv Stock Exchange, will probably continue in the coming days. Trading on the Tel Aviv Stock Exchange will be highly volatile in the short-term and the market will be strongly affected by trading directions in international markets, especially in the US," Bank Leumi said in its weekly note to clients. Reacting to Friday's sell-off on Wall Street, the major indices on the Tel Aviv Stock Exchange skidded Sunday, with the Tel Aviv 25 index down 3.7 percent, the Tel Aviv 100 index off 4.1% and the Real Estate 15 index slumping 6.7%. Bank Leumi analysts said it was clear that the Bank of Israel intended to continue raising interest rates next month, further weighing on the stock market. "Tighter monetary policy is liable to harm the stock market later on, especially real estate stocks, which have been falling recently." Looking further out, Bank Hapoalim was more optimistic, forecasting that the TASE would rise in the long-term on the back of positive macroeconomic data, although the short-term correction would continue, in line with the sell-off in international markets. "While we will see a rise in risk level and market volatility, we believe that the medium- to long-term trend will become positive again, mainly because of positive macroeconomic figures, low multiples, and expectations of continued good profitability by companies," said Bank Hapoalim. Similarly, Dani Fishman, joint CEO of Tamir Fishman, said the TASE would continue to echo the mood of the world's dominant financial markets, especially Wall Street. "This situation will continue over the next few weeks until the end of the correction," he said. Discussing the factors behind the recent turmoil in global markets, Union Bank said in its weekly market survey that psychological rather than economic factors were dominating. "We believe that last week's falls were a correction and not a change of trend. We think that psychological, rather than economic, factors were behind the falls in shares on international markets," said Union Bank. Commenting on the "panic" across global markets over the recent week, Aaron Leitner, global investment strategist at Tandem Capital, said the markets were experiencing a classical situation of overshooting on market activity. "I believe that although investors have not been able to shake off the fear of a credit crunch, the damage caused by the subprime mortgage market is contained and as economic fundamentals are intact, we will see the markets stabilize again in the Fall after slower activity in August when many investors are on vacation," said Leitner. "Looking ahead, the markets are bound to experience more of this type of corrections of 5 to 10%, which will be part of the life of an equity investor to which he will have to get used to."