La situation through which some of the so-called emerging economies are going through, driven by the crisis of Turkey and ArgentinaIt is going to generate a series of doubts for the world economy and of course also for the economy. In addition, it will be a litmus test to show how the equity markets will evolve in the coming months. Where you must be protected against what may happen.
Of course, the evolution of emerging countries is going to be an excellent thermometer on the strategies that you are going to use to operate in the financial markets and especially in the stock market. It cannot be forgotten that in these summer months the alarms have gone off among small and medium-sized investors before the announcement of the President of the United States, Donald Trump, on whether a clear intention to double the aluminum tariffs from one of those countries, such as Turkey. To the point that the Turkish lira has generated a fall close to 10% against the US dollar, with an annual decrease of 50%
Within this scenario, other very worrying news for the world economy has been added, which is being reflected in the equity markets and whose main protagonists are some of the most relevant emerging countries. As for example, in Argentina where the weight has plummeted in its price due to the evident fear about the real possibility of not being able to assume the maturities of its debt. To the point that the markets are already talking about the emergence of a new corralito like the one that happened between 2001 and 2002.
Emerging: interest rates rise
This situation in the Ibero-American country has ultimately led the Argentine issuing bank to decide to increase interest rates, which have passed in a very few days from 45% to 60%. With regard to the currency markets, the response has been no less worrying for the interests of investors. When there was a devaluation of almost 50% of the Argentine peso against the dollar. In this sense, one of the most affected financial markets is Spanish due to its exposure to the Argentine economy as many Spanish companies are present. For this reason, the benchmark index of the Spanish stock market has been one of the most affected during this year.
But not only the dangers come from Argentina. Of course, this scenario has no longer spread to other currencies of emerging countries. For example, the Brazilian real, the South African rand, the Mexican peso or even the same Russian ruble. The main reason to explain this very special situation that emerging countries are going through is fundamentally due to the high level of state debt that these countries maintain, although it is a very dangerous situation that has been aggravated by other factors of special relevance. As is being warned from the International Monetary Fund (IMF).
World trade
On the other hand, the imposition of harsh tariffs by the United States is significantly damaging international trade, as is being reflected in the stock markets of almost the whole world. Up to levels not seen in this year that is about to disappear, with the sole exception of US equities, which are almost at all-time highs. Forecasts for economic growth in the world for this year are 4,4%, although lower than the 4,7% obtained last year. Other explanations for this decline are due to the specific slowdown in the Chinese economy.
Because indeed, the China's economy it is also affected by the effects of protectionist measures in the United States and its effect on international stock markets could be very negative for next year. In particular, with regard to the banking and financial sector in general, which is of course the most affected of all. As you have seen during the past weeks. In this sense, it is a sector that you should avoid its exposures on the stock market as a strategy to defend your positions in the equity markets.
Stock market in downtrend
Of course, one of the effects that instability is causing in emerging countries is a flight from small and medium investors. Not surprisingly, with this scenario, there have already been many investors who have decided to change the high interest rates offered by the stock and debt markets offered by emerging countries and have sought refuge in the safest places for financial markets. One of them is currently the New York Stock Exchange, whose most relevant index, the Dow Jones, is at historical highs and progressively as the months have passed.
What happened in our environment?
In any case, many of the investors are considering how this scenario that has opened in emerging countries in Europe and of course Spain is going to affect. Well, their indices have turned around in the middle of the year and they are seeing how its main stock indices fall. Although not yet with the intensity of emerging countries, as it was logical to foresee by financial analysts. Another very different thing is what could happen next year and whose prospects are not positive, according to the reports that have appeared in recent months.
In this case, the reasons to explain this behavior are diverse and of a different nature. Although what is influencing this new trend is also the high level of debt that many European economies have, especially those in the south of the old continent. Where the exposure of some European banks to the Turkish and Argentine economies is very strong. In particular, with regard to Spanish banking already BBVA which has a great connection with the Ottoman country. Something that can weigh down the evolution of the Ibex 35 due to its dependence on the banking sector.
Withdrawal of stimuli
Another explanation for determining this scenario that occurs in financial markets lies in the fact that the moment of withdrawal of financial stimuli by the government is very near. European Central Bank (ECB). To the point that this much discussed measure can worsen the financing of companies established in the euro zone. In this sense, the banks' analyzes show that the stock market may show losses as of January, and in some cases under strong intensity. There will be no choice but to be prepared for this new scenario offered by the European stock markets and the Spanish one in particular.
Of course, neither Spain nor its financial markets are going to get rid of this international situation and proof of this is the depreciation of national equities since April. Even if things can get worse, in the opinion of some of the most relevant financial analysts. The best advice for investors is to be in a liquid position to what may happen in the next. Also as a strategy to take advantage of business opportunities that will undoubtedly arise from now on. With stock prices that can be much more competitive than before.
It is clear that the high level of debt in both emerging and developed countries may aggravate the situation in the coming months or even years. To avoid this unpleasant situation, it would not hurt to apply some guidelines for action that will have the main objective of protecting your savings over other technical considerations. Like the following that we are going to expose you below:
- It is not the best time to invest in the stock market. You can look for other more profitable alternatives, such as raw materials or precious metals.
- It's time to give you a break and note how the bags evolve before the aforementioned problems.
- It is preferable to find fullfilment of security requirements In financial products, you have to look for a very high return that in the end they will not be able to give you.
- Fixed income will raise your interest And it may be a good time to resume this kind of investment that you have long forgotten.
- Do not forget that you can also make your savings profitable with bag down. Through inverse products that right now can be an excellent opportunity to obtain high capital gains. Although the risks are higher.
You will have no choice but diversify investments, where term fixed income products should have a place in your next investment portfolio. Not in vain, you will have a fixed and guaranteed income every year, although not very high. But it is a proposal that should not be lacking in periods of greater instability.