2020 is a ‘lost year’, Bank Hapoalim expert warns

While Israel seems to be doing well in the amount of aid it offers citizens, Professor Leo Leiderman warns that the figure represents ‘the decision, we have no way to judge performance.'

Bank Hapoalim (photo credit: AVIV GOTTLIEB)
Bank Hapoalim
(photo credit: AVIV GOTTLIEB)
2020 Is a “lost year”, Professor Leo Leiderman told those taking part in a digital panel about the COVID-19 crisis and the investment market held by Bank Hapoalim on Thursday. “It’s possible that there will be no more world after the coronavirus,” he warned, meaning there will be no return to “business as usual.”
Israel is currently second only to the US in number of new coronavirus cases, which he said increases the risk of further complications when winter, and seasonal flu, begins.
Citing Chair of the Federal Reserve Jerome Powell, who told a reporter the economy will follow the health developments as the world seeks to curb the virus, he said “the second wave reached us sooner than we expected.”
Israel, and the world, is in the midst of a recession, he said. The GDP is dropping in the US (-32.9%) and the EU (-40.3%) for the last quarter with Israel expected to release its figure on Sunday. “We’ve become poorer,” he explained.
One million Israelis are currently out of work, 80% of whom were placed on unpaid leave. He claimed that “it is clear nobody believes all these people will return to full employment.”
The job market is using the crisis to undergo various structural changes. These include using robots, digitalization, and offering flexible work models which include working remotely with a decrease in the number of office hours.
He seemed to point to bank experts supporting the view that Israel is headed towards elections when he said “we hope a new government will be in place that will allow us to get more things done” in relation to the bank investing in infrastructure, green energy, and roads.
Israel is placed among the countries that offer the most aid to their citizens, Leiderman said, but pointed to the fact the figure represents “the decision” to offer it.
“We have no way to judge performance,” which means we don’t know how much aid was actually delivered and how Israelis chose to use it.
He stressed that “all over the world, banks and Finance ministries agreed to do everything it takes” to print money and take on debt while increasing the deficit, “in an attempt to prevent a temporary crisis having permanent effects.”
He pointed to some surprising findings, such as NASDAQ rising by 20%, as evidence that some markets are faring well. Among them, e-commerce and digital streaming platforms.
Israel’s technology market reported a 27% drop in deals vs a 48% drop in “real world” deals,  CEO of  Poalim Capital Markets Kobi Shalom said.
CEO of Poalim Capital Markets Kobi Shalom (Credit: Raya Altman)CEO of Poalim Capital Markets Kobi Shalom (Credit: Raya Altman)
He pointed to the figure of $2.5 trillion, on the global market, which is “waiting” for a “good” investment opportunity. “It’s important to buy [a] good [investment],” he said. “If it ain’t good, it won’t matter what you buy.” Historically speaking, Bank Hapoalim pointed out, investments taken during a time of financial crisis had the potential of bringing the highest yields.
He singled the food and agritech markets as being “in focus” as opposed to tourism or aviation which are now “not in focus.”
Taking the example of Bed Bath and Beyond, he suggested the retail market is able to bounce back during COVID-19, as that US company was able to do. It did so by transforming its stores into pick up and logistic centers, investing in online services and selling assets to gain the needed funds to stay afloat. For Shalom, this is a good example of how to survive a 50% drop in sales during unexpected times.
He predicted Estee Lauder and Levis aren’t going away any time soon.
"We at Poalim Capital Markets believe that the main focus when analyzing a company today should be on the company's ability to survive the next two years," he said. "We stress now more than ever the importance of a strong balance sheet with low leverage and liquidity."
Leiderman pointed to other points of careful optimism, the US real-estate market is expected to grow and, despite the extreme measures the world governments are taking, “we did not see a surge of inflation yet.”
When asked what may happen should a vaccine be found, he pointed to China. Where consumers aren’t as eager to return to shopping centers as hoped, as evidence such news will not be the silver bullet to rid the world of the lean times ahead.
“I myself would not be the first to board a plane or attend a concert,” he said, speaking about such a hypothetical vaccine being available.
Bank Hapoalim is gearing up for another panel soon that will deal with the Israeli real estate market situation during COVID-19.