The Second Lebanon War broke out exactly one year ago tomorrow.

While the results in the battlefield were harsh, as far as the financial markets were concerned, the war succeeded in proving that Israel has a strong, resilient economy.

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Despite pessimistic estimates at the start of the fighting about expected expenditures and reduced growth, which did not come true, and the sharp market reaction during the war's first few days, the stock market quickly reversed course and more than recovered from the shock.

From the war's outset until yesterday, investors who put their money in the TA-25 blue chip index would have realized an incredible 40 percent return, from 815 points to 1,140.

The war also proved that foreign investors were not scared off so quickly, and as far as they are concerned, despite all of the security risks and dangers hovering over our heads, Israel is an emerging economy with excellent macro-economic results and serious profit potential.

The past year was characterized by record issues, particularly of bonds.

The index of corporate bonds rose 6.5 percent over the past year. However, government bonds rose even more, 7.3 percent. At the same time, the dollar dropped and interest rates are now only 3.5 percent.

The biggest gainers over the past 12 moths were real estate shares, with the Real Estate-15 index up 53 percent, even though it has stagnated over the last few months.

Medium- and small-cap Yeter shares showed returns of 52 percent, but the banks have significantly underperformed with only a 8.6 percent gain for the entire year.

The shekel is up 3.7 percent against the dollar since the start of the war, although it has lost 3.1 percent against the euro during that same period.