Turkish markets in turmoil: Anything but a delight for investors

Joshua Brockwell is Investment Communications Director at Azzad Asset Management. He can be reached at joshua@azzadfunds.com A selloff in Turkish markets over the last few days has reverberated around the globe, prompting investor flight to safe havens like U.S. Treasuries, the Swiss franc, and the Japanese yen. Turkey’s inability to prop up its tumbling lira, prompted in part by diplomatic tensions with the U.S., led to the currency’s largest losses since 2001 on Friday. Turkey has faced economic difficulties since the start of the year. The lira has lost more than 40% of its value this year thanks to presidential intervention in central bank policy, fiscal stimulus, growing inflation, and a hefty current account deficit. As markets remain jittery over possible spillover effects, investors are left to piece together the real impact of recent events on their portfolios. Is the Turkish economic engine stalling out? Could contagion there spread to foreign shores? If Turkey wants to right the ship, it’s clear that more of the same cannot continue. Until things level off, financials and emerging markets look likely to lag. Bank exposure Reports on Friday suggested that the European Central Bank (ECB) is concerned about southern European banks, which have