Markets just don’t like politics

Dünya Executive - - COMMENTARY - Atilim MURAT Analyst

The withdrawal of the U.S. President Donald Trump-backed healthcare-reform package rattled global markets. Now, some analysts believe the correction will continue, while others expect optimism to return. What we actually see are markets are topsy-turvy, with key financial indicators providing mixed signals.

Defensive stocks in the United States rise, then soon tumble. While these risk-adverse shares fell, safe-haven investment­s like gold neared a seasonal high in February. And shares in mining companies are not supporting gold prices, while there has been little change in the physical purchase of gold by Western investors.

In short, financial indicators that should be supporting each other are not. This shows financial markets do not like pricing in political developmen­ts. In this environmen­t, investors are struggling to analyze the impact of politics. Due to strong fluctuatio­ns, market profession­als are unable to make a difference. A new script is written each day as politics dominate.

The U.S. Congress’ decision to cancel the vote on healthcare spared the Trump administra­tion an embarrassi­ng defeat. Such a defeat would have sparked a blame game between Republican­s and Democrats. This way, the U.S. administra­tion was not placed in a tough spot and political tensions were eased. In analyzing what comes next, it’s important to remember that Trump is a consummate dealmaker. He will want to exact some pain for being blocked in fulfilling hi+s promise of healthcare reform, even as U.S. markets still benefit from expecta- tions of tax cuts and infrastruc­ture spending.

It’s just as hard to predict the effect of political events on the economy in Turkey, as it is in the United States. Regardless of the outcome of the April 16 constituti­onal referendum, I still expect a calmer period to ensure, with more focus on pricing and economic fundamenta­ls.

Measures to support the real economy have included tax breaks; loans from the Small and Medium Business Developmen­t and Support Administra­tion (KOSGEB); the Credit Guarantee Fund (KGF), which helps ease financing for enterprise­s; and Treasury support for credit-guarantee institutio­ns. The tax cuts will have the direct effect of boosting consumptio­n in the near term. Loans made with KGF guarantees have risen sharply: In one week alone after its launch, almost 40,000 enterprise­s benefited from this. This will reflect positively on the economy in the coming months. Some of the enterprise­s taking out these loans are using them to pay down past debt, while some of it is being used for new investment, which will spur growth and employment. We don’t need to lament, “If only this had happened in Turkey …” Let’s look ahead.

Mistakes have been made in the last year and a half, and things beyond our control have happened. Let’s wait and see the results of economic measures in the short term. If we consider the period following the failed coup attempt in July as preparatio­n for the referendum, policies have been put in place to boost the economy. The time to discuss the structural reforms the Turkish economy needs is approachin­g.

Newspapers in English

Newspapers from Turkey

© PressReader. All rights reserved.