Stocks ended the week in mixed territory as trouble with Turkey's currency affected U.S. equity performance on Friday, August 10th.[1] For the week, the S&P 500 lost 0.25%; the Dow declined 0.59%; and the NASDAQ increased 0.35%.[2] International stocks in the MSCI EAFE stumbled, giving back 1.57%.[3] 

Although last week brought relatively few economic updates, we did learn that the labor market continues to improve and consumer prices are on the rise.[4]While this news may have affected market performance, the challenges facing Turkey's economy had an outsize impact on global stocks.[5]  

What happened to the Turkish lira?

The Turkish lira dropped 14% to 6.46 per dollar, the weakest on record, with the largest drop in more than 17 years. The lira ended the week at a record low against the U.S. dollar.[6] Tension between the U.S. and Turkey played a part in the decline as President Trump tweeted plans to double tariffs on Turkish steel and aluminum imports. This potential tariff hike followed a stalled conversation between the two countries concerning an imprisoned U.S. pastor who Turkey believes supported a 2016 attempted coup.[7] 

How did investors react?

The resulting drop in the lira's value concerned investors and led to losses in markets worldwide. Friday, the S&P 500 marked its largest daily decline since June after getting close to a new record high.[8] 

Why do investors care?

The lira's drop is another sign that emerging markets are experiencing challenges in their economies.[9] Some investors worry that Turkey's economic crisis could spread to other countries or affect interest in other emerging markets.[10] 

Should you be concerned?

Probably not for now. U.S. companies don't have a tremendous amount of exposure to Turkish markets.[11] 

We know that global dynamics can be complex and understanding their specific effects on your financial life may seem challenging. If you have any questions, contact us any time. 

ECONOMIC CALENDAR

  • Tuesday: Import and Export Prices
  • Wednesday: Retail Sales, Industrial Production, Housing Market Index
  • Thursday: Housing Starts, Jobless Claims
  • Friday: Consumer Sentiment 

 


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Diversification does not guarantee profit nor is it guaranteed to protect assets.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies. 

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.

Emerging markets are sought by investors for the prospect of high returns, as they often experience faster economic growth as measured by GDP. Investments in emerging markets come with much greater risk due to political instability, domestic infrastructure problems, currency volatility and limited equity opportunities (many large companies may still be "state-run" or private). Also, local stock exchanges may not offer liquid markets for outside investors.

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These are the views of Platinum Advisor Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

[1] www.cnbc.com/2018/08/10/us-markets-political-concerns-keep-investors-on-edge.html
[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
[3] www.msci.com/end-of-day-data-search
[4] wsj-us.econoday.com/byshoweventfull.asp?fid=485230&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
www.cnbc.com/2018/08/10/us-cpi-july-2018.html
[5]www.marketwatch.com/story/us-stocks-pulled-into-global-selloff-as-turkeys-currency-crisis-raises-the-alarm-2018-08-10?dist=markets
[6]www.bloomberg.com/news/articles/2018-08-09/asia-stocks-face-mixed-open-dollar-strengthens-markets-wrap
[7] www.cnbc.com/2018/08/10/turkish-lira-loss-deepens-as-pm-erdogan-calls-for-citizens-to-convert-.html?recirc=taboolainternal
[8] www.marketwatch.com/story/us-stocks-pulled-into-global-selloff-as-turkeys-currency-crisis-raises-the-alarm-2018-08-10?dist=markets
[9] www.marketwatch.com/story/us-stocks-pulled-into-global-selloff-as-turkeys-currency-crisis-raises-the-alarm-2018-08-10?dist=markets
[10] www.marketwatch.com/story/worried-about-turkey-heres-what-it-will-take-to-push-wall-streets-buttons-2018-08-10
[11] www.marketwatch.com/story/us-stocks-pulled-into-global-selloff-as-turkeys-currency-crisis-raises-the-alarm-2018-08-10?dist=markets