EM reflect Black Monday financial climate

When I began my journalistic career in the early 1990s, every article and book about financial markets referred to Black Monday. Oct. 19 marked the 30th anniversary of the infamous Wall Street stock market crash, which resulted in huge downturns in developed markets: the Dow Jones dropped by 23%, the S&P 500 fell by 20% and the FTSE 100 lost 11% of its value. At that time, rising interest rates, geopolitical tensions and skyrocketing asset prices combined to deliver a sharp correction in the markets. “Other than interest rates, those ingredients are in place today but monetary policy settings and the level of bond yields are at levels that suggest the market souffle can rise a fair bit more before the inevitable happens,” said Kit Juckes, a senior strategist at Societe Generale in London. Last week, the Dow powered past 23,000 and the index has climbed to 51 fresh highs this year. Meanwhile what concerns many investors now is not the market structure as much as valuation. In 1987, the bull market was five years old. The current bull market is eight years old and counting. Many investment managers have expressed concern about the stretched valuations, though the year-on-year growth in earnings is roughly matching the S&P 500 advance this year. Few analysts and investors see an imminent end to the rally.

As we look closely to emerging markets, particularly Turkey, it’s all about the same: tensions, volatility and rising inflation. You may follow the vanishing traces of asset performance in the commentaries from respected analysts.