Turkish Lira Tumbles, Fear of Contagion Grows in the Weekly Market Update by Valeo Financial Advisors (August 11, 2018)
August 11, 2018    Disclosures    POSTED IN  InvestmentsEconomyMarkets

Trade bantering continued this week against the U.S. and China both declaring additional tariffs on $16 billion of goods; these are lined up to go into effect on August 23. Domestic consumer price data was release for July and showed 2.4% inflation year over year ex. volatile food and energy prices. This data added conviction to investors on the Federal Reserve’s path for interest rate tightening. Tesla went for a wild ride this week after founder, Elon Musk, sent a tweet mentioning his consideration to take the company private at a strong premium to current prices. Questions over funding the $420 offer has market participants skeptical – shares closed Friday at $355.49.

Stocks declined around the world this week as investor angst grew over potential contagion from Turkey’s economic crisis. U.S. large cap equities would have capped a six straight week advance but ultimately fell moderately on global selling. Doubling tariffs against Turkey’s steel and aluminum sent the Turkish lira spiraling downward to weakest on record, a 41% decline YTD – this pushed other foreign currencies lower and hurt international returns. U.S. Treasury rates declined which sent fixed income higher but not enough to erase losses YTD, and the emerging market debt slump continued to crater based on the news.

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