In January 2021, we presented 5 investment themes for the year. A particular focus was placed on the harmonized, or even correlated evolution of the largest economic blocs’ monetary policies, and its consequences.
Rising public deficits coupled with rising external deficits (twin deficits) have caused the Turkish lira to drop sharply. Since the last financial crisis in 2008, the lira has devalued by about 17% per year against the dollar. Over the period, the parity went from 1.20 to 7.80, thus reaching its historical high against the dollar (i.e. its lowest valuation)! This year, the TRY lost more than 30% against the greenback.
After the violent crash of global equity markets in March, one might have expected that during the (technical!) rebound, defensive assets would have been penalized.