Eq: EMs

(New York)

If you are a gold bull, this has been a really rough period. While gold has been weakening for years (relative to the market), the last several weeks has been particularly concerning. Despite all the turmoil in global markets that has come alongside Turkey’s financial crisis, gold just hit its weakest level since March 2017. Further, despite many panics in markets this year, gold has fallen 9% and has not gained from its reputation as a safe haven. The rising strength of the US Dollar has not helped gold’s prospects.


FINSUM: Gold is down to around $1,200 an ounce despite all that has happened this year. If the bear market had not been going on so long, it would almost seem like a buying opportunity, but rising rates and a rising Dollar are strong headwinds even if fundamentals changed.

(Istanbul)

Following a diplomatic spat with the US that has thrust Turkey into an economic tailspin, the country is entering full-blown crisis mode. Turkey’s Lira is down more than 35% this year and fell another 5% overnight. Bond yields are soaring alongside the losses, with the country’s ten-year yielding over 20%, a move exacerbated by Istanbul’s large budget deficit. The crisis is going so badly that the EU is seeking to limit the Eurozone’s banks from exposure to Turkey’s meltdown. BBVA, UniCredit, and BNP Paribas have the most exposure to Turkey.


FINSUM: There is no end in sight to the selloff. The big hope is that Turkey is supposed to unveil a new economic model today that will show how it plans to cut debt and shrink its budget deficit. That would be a start.

(Istanbul)

There is a big mess going on in Turkey. The country’s spat with the US is playing out in financial markets, and it is really starting to hurt. The Lira is dropping fast, and the country’s benchmark bond yield just hit a whopping 20%. The huge losses in the currency and bond market might also lead to a rout and/or chaos in the country’s banks, which are now only weakly capitalized.


FINSUM: It is important not to muddle Turkey with other emerging markets, as many of its problems are specific to itself. Still, there are similarities and a renewed widespread selloff does not seem out of the question.

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