Talking Turkey

Emerging market (EM) equities have been under pressure recently thanks to the combination of a stronger U.S. dollar, the ongoing U.S. and China trade dispute, concerns in Argentina, and now worries over the financial stability of Turkey.

Is Turkey the first domino to fall, and will a global crisis follow? Fortunately, we don’t feel that is the case at this time, as many of the Turkey issues have been self-inflicted.

As LPL’s Chart of the Day shows, EM markets have significantly underperformed the S&P 500 Index and MSCI EAFE Index this year, but since June, the underperformance has been even more pronounced.

EM Stocks Have Dramatically Underperformed the U.S. on Trade, Turkey Fears

“The Turkey situation is something we are watching closely, but with EM overall still seeing solid economic growth, strong demographics, and attractive valuations, we continue to suggest modest EM exposure for suitable investors looking to maintain a well-diversified portfolio,” says LPL Research Chief Investment Strategist John Lynch.

Be sure to read our Weekly Market Commentary, due out later today, in which we list seven reasons why you shouldn’t bail on EM.

IMPORTANT DISCLOSURES

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

The MSCI EAFE Index is a capitalization-weighted index that tracks the total return of common stocks in 21 developed-market countries within Europe, Australia and the Far East.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not bank credit union obligations and are not endorsed, recommended or guaranteed by any bank credit union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.

Member FINRA/SIPC

For Public Use — Tracking # 1-761781 (Exp. 05/19)