Turkish Lira Crisis — August 2018
EM currency contagion fears and US equity resilience
The Turkish lira lost approximately 35% against the US dollar in 47 days. Erdogan refused to raise rates. Contagion fears briefly hit EM currencies and European bank stocks, but the S&P 500 lost only 0.25% for the week of August 10 and recovered within days.
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
The S&P 500's largest daily decline measured under 1%. This pattern repeated across the 1997 Asian crisis, 1998 Russian default, and 2015 yuan devaluation.
Banks with Turkish loan exposure fell 2-4%. S&P 500 holders had no real exposure.
Turkey's crisis was self-inflicted: Erdogan's refusal to raise rates destroyed central-bank credibility.
Single-country currency collapses have consistently stayed local unless leverage connects them outward — the lira crisis clipped European banks holding Turkish loans while the S&P 500 barely moved. If EM currency risk is on your mind, the review belongs in your international allocation, screened for countries running unorthodox monetary policy.