Emerging-Markets Calm Is Likely to Give Way to More Volatility
Neither Argentina nor Turkey has taken the steps to place their economies on a path to stability.
The Turkish lira could be in for more turbulence.
Photographer: Chris McGrath/Getty Images
The calmer markets and the bounce in exchange rates at the end of last week make it tempting to declare the end of the summer turmoil in emerging economies. Those positive developments, along with increasing evidence of investor differentiation, naturally give rise to hopes that we are experiencing a repeat of early 2016, when heightened concerns about China-driven market disturbances gave way to a comforting restoration of capital flows, higher asset prices, and a far more supportive operating environment for individual emerging countries.
I share this hope and recognize the historical precedent. Yet there are four reasons to remain cautious.