What's going on?

The value of the Turkish currency (called the lira) and the Turkish stock market both rallied about 5% as a result of an election over the weekend that handed the AK Party�a surprise majority in parliament.

What does this mean?

Turkey is a major emerging market (EM) economy (it�s also a member of the G20). Like many EM countries, it has been struggling economically in the past few years - but Turkey�has been particularly hampered because of political instability. The market�s positive reaction was likely because the election result�is expected to�bring some political stability to the country which could help create better conditions for economic growth.

Why should I care?

1. The bigger picture: There are other extraordinary challenges facing Turkey. We�re limiting our discussion to finance, but acknowledge that these elections are very impactful for other reasons as well.
2. For EM investments in general: Lots of EM countries rely on international investors - and those investments can dry up. Turkey, for example, imports a lot more than it exports (something which is difficult to sustain while growing its economy). This makes it reliant on outside investors to, essentially, fund the operations of the country (just like a person, a country can�t forever survive by spending more than it earns). A potential rise in US interest rates would encourage American investors to keep their money in the US - a major reason why rising US interest rates could be bad for emerging economies. So, there�s still a lot of risk for both Turkey and EM investments in general.