The shekel has been the story of the past two quarters in Israel, with sharp appreciation on the back of the Gaza ceasefire, a supportive external balance and high real interest rates.

We don't expect the rally to go much further on a structural basis. Israel is no longer a services export "tiger", and the recent pickup in domestic credit and spending activity at home is weakening external surpluses.

What about equities? We're conflicted on the equity front. The domestic recovery has helped buoy listed earnings at the margin - but given how far the local market has run we also worry about sustainability.