Despite Wall Street's gloom and doom of late, at least one category of the market is still going strong. Stocks from companies based in Israel—which is the second-largest foreign trader on U.S. exchanges after Canada—have grown by nearly 9 percent since the beginning of 2009, according to the MSCI index of emerging markets. The Tel Aviv stock market is also up.
That's at a time when European and U.S. stocks fell by around 18 percent. The trend is surprising considering Israel's turmoil over the past three months: the Gaza assault in December and January after weeks of heavy rocket attacks on the Jewish state; national elections that have yet to produce a government; the threat of a nuclear Iran.
Last week, Israel's intelligence chief said the Iranian nuclear program has passed a key threshold, raising new speculation of an Israeli military strike.
So how to explain the strong performance, given that bearish investors tend to run from instability? Israeli stocks on Wall Street come mainly from high-tech and medical sectors—two areas less exposed to the credit crunch.
Also, the basic conservatism of the Israeli financial system, as well as its lack of dependence on mortgage-backed securities, have ensured its stability relative to the rest of the world, says leading analyst Eytan Avriel.
"Israeli banks were horse-drawn carts and U.S. banks were racing cars," says Avriel. "But those racing cars crashed badly whereas the carts traveled more slowly and stayed on course."
Yet another helpful factor: the discovery of a major natural gas field off Israel's coast in January, which has helped companies with stakes in the drill, such as DELEK, to peak sharply.
Still, Avriel cautions against reading too much into Israel's recent performance, warning that "there are no big miracles here." But in these rough economic times, investors are thankful even for small ones.