Euro Year-End Forecast: Expert Analysis on Turkish Lira, Stocks, and Gold
Economic Realities and Inflation Trends
Turkey’s economy is navigating a period of adjustment with the implementation of more realistic economic policies. While the rate of inflation increase has shown signs of easing due to base effects, recent figures indicate persistent inflationary pressures. The latest inflation data revealed an annual inflation rate of 51.97%, with a monthly increase of 2.47%. Although the lack of a monthly decrease in inflation isn’t ideal for the broader economic picture, expectations for inflation to decline within the framework of the Medium-Term Program remain.
BIST Stock Exchange Experiences Correction After Record Highs
Borsa Istanbul (BIST), the Turkish stock exchange, experienced a significant downturn after reaching a historic peak of 11,252 points in mid-July. Entering a downward trend, BIST fell to 9,523 points before a partial recovery. However, tepid buying interest and inconsistent foreign investment activity are contributing to market volatility in the BIST.
Currency Markets Show Upward Trend
The foreign exchange market, of particular interest to exporters, has begun to exhibit an upward trend. The US dollar exchange rate, after a period of relative stability, has resumed its ascent. This resurgence is partly attributed to the declining appeal of Currency Protected Deposits (KKM) and the economic administration’s intention to phase out KKM. Consequently, investors withdrawing from KKM are increasingly turning to foreign currencies. Recent data confirms a rise in foreign currency deposits.
Gold Enjoys a Period of Strong Performance
Gold prices have seen robust gains, initially driven by market anticipation of interest rate cuts by the US Federal Reserve (Fed). However, with the expectation of rate cuts already largely priced in, some analysts suggest further significant increases may be limited. The market is keenly watching how gold will react once the Fed actually implements interest rate reductions, especially after reaching historical highs.
Investment Funds Navigate a Critical Phase
Investment funds are performing variably depending on their asset class focus. While some equity-based funds are showing positive divergence, others have experienced sharp declines. The recent surge in gold prices has benefited gold-based funds, delivering substantial returns.
Experts have provided assessments on Borsa Istanbul, the dollar, gold, investment funds, and the broader economic outlook.
Expert Commentary and Market Forecasts
Eral Karayazıcı – Inveo Portfolio Fund Management Director
“BIST Poised for Continued Growth”
“At the start of the year, I anticipated BIST reaching the 375-400 USD band (approximately 15,000 points) by year-end, driven by a strong rally in global stock markets. However, persistent US inflation dampened the external environment in the first half of the year, leading to sideways movement in global indices.”
“Despite this, BIST outperformed, increasing by 28% in the first half of the year, reaching 325 USD. Following a two-quarter lag, as US inflation began to decline, the second half of 2024 started positively globally. However, BIST experienced negative divergence this time, ending August at 288 USD.”
“This divergence is attributed to a price disadvantage compared to other exchanges due to its strong first-half performance, and the inevitable economic slowdown resulting from the fight against inflation.”
“For the final four months of the year, I anticipate continued gains in global stock markets, which could positively influence BIST.”
“However, whether BIST 100 can reach 375 USD is questionable, with a risk of a two-quarter delay. While I expect an upward trend in global stock markets over the next 18 months, predicting the extent of this movement in the next four months is challenging. It’s also possible BIST may initially lag behind this movement.”
“Therefore, I believe a more likely scenario for the 2024 year-end is a range of 340-350 USD (13,000 – 13,600 points).”
“Expect Currency Appreciation in Line with Inflation”
“Gold is likely to continue its upward trend, albeit at a moderate pace, for some time. It could test 2700 USD by year-end and potentially 2900 USD in the first half of 2025.”
“Regarding currencies, we entered a new trend in the second half of June. For the past two and a half months, exchange rates have been increasing at a rate close to inflation.”
“I expect this trend to continue, but even if monthly increases slightly exceed inflation, I believe the average increase will likely remain below deposit yields and closer to the inflation rate.”
Cemal Demirtaş – Ata Investment Research Deputy General Manager
“BIST Could Close the Year Between 11,500 – 12,500 Points”
“Starting 2024 at 7,470, the BIST-100 index rose by 50% by July 22nd. We believe profit-taking, influenced by the high-interest rate environment and global uncertainties, triggered the pullbacks in August. Increased profit realizations in August primarily led to a roughly 16% decline in the BIST-100 index, reaching 9,500 levels in the last 1.5 months. Recently, dip-buying has contributed to a rebound, pushing it back above 10,000 points.”
“According to our strategy report published on August 23rd, our 12-month BIST-100 index target is 14,000, indicating an upside potential of around 40%.”
“For a year-end estimate, based on current macroeconomic forecasts, we can anticipate a BIST-100 level in the range of 11,500-12,500.”
“Dollar at 37.72 TRY, Euro at 40.37 TRY Forecast for Year-End”
“Our year-end forecasts for Dollar/TRY and Euro/TRY are 37.72 and 40.37 respectively. While we don’t have a specific forecast for gold, we anticipate the gold price per ounce to trade in the 2,400-2,500 range, given ongoing geopolitical risks. This provides a crucial euro year-end forecast for investors.”
“Central Bank May Cut Rates in December”
“We expect the Central Bank of Turkey (TCMB) to continue its normalization steps until December. As expectations strengthen that the fight against inflation is yielding results, they might take a step towards lowering the policy rate. We anticipate a potential 250 basis point rate cut in the TCMB policy rate in December.”
“Rate Cuts Could Boost Equity Investments”
“Considering that the prerequisite for interest rate cuts is the success of the inflation-fighting program, and assuming supportive global conditions, we anticipate renewed interest in equities, especially as 2025 expectations solidify. Barring unexpected negative geopolitical developments, investors seeking returns will likely turn their attention to the shares of companies with growth potential – with selectivity.”
“Fitch Could Upgrade Turkey’s Credit Rating”
“On March 8th, Turkey’s rating was upgraded from ‘B’ to ‘B+’, and the outlook was revised to ‘positive’.”
“We believe Fitch may further upgrade the rating by one notch to ‘BB-‘ on September 6th, with a continued ‘positive’ outlook. While this would still leave us 3 notches below investment grade, continued sound policies in 2025 could pave the way for a return to investment grade, which would be very positive for the Turkish economy and markets.”
“Year-End Inflation Target at 42%”
“We anticipate the second half of 2024 will test the resilience of domestic demand and the economy. During this period, we believe investors should focus on companies with specific narratives resilient to economic slowdown. We’ve seen inflation decline from 62% to 52% since August. We expect this disinflation trend to continue, projecting inflation to fall to 42% by the end of 2024 and 28% by the end of 2025. We forecast economic growth at 3.2% this year and 4.2% in 2025. Overall, we expect the normalization process that began in the second half of 2024 to extend into the first half of 2025, with renewed foreign investor interest as macroeconomic balances stabilize.”
“Commitment to Rational Policies Expected”
“We anticipate the Medium-Term Program (OVP) will emphasize a commitment to rational economic policies, presenting a realistic and grounded economic program with reasonable macroeconomic targets. In this process, steps to improve foreign investor confidence and the overall investment climate will be crucial in attracting direct and portfolio foreign investment.”
Investment Fund Recommendations for Investors
“We advise investors to determine asset classes and allocations based on their risk profiles. A model portfolio could consist of 25% foreign currency assets and 75% Turkish Lira assets. Within this, allocations could be 45% equities, 30% Turkish Lira fixed income, 10% gold, and 15% foreign assets (equities, eurobonds).”
“Long-Term Equity Investments Favored”
“We believe this is a suitable time for long-term equity investments, managing short-term risks to prepare for a macroeconomic stability and low inflation scenario in the coming years. We recommend closely monitoring companies with healthy growth potential, a commitment to sharing, and adherence to governance principles. Equity investors should be selective, recognizing they are becoming partners in companies. We suggest seeking professional advice for stock and fund selection, but making investment decisions based on their own due diligence.”
Dr. Erkan Kork – BankPozitif Chairman
“15,000 Point Target for BIST Not Distant”
“I expect Borsa Istanbul to perform better towards the year-end compared to recent weeks. The 15,000 point target is not far-fetched. BIST100 has climbed back above 10,000 points. While it may be premature to comment on year-end targets, the market improvement will become more palpable in the coming weeks. Then we will have a clearer view of the equity markets. However, I still expect the index to close the year near the 15,000 point target.”
“Turkish Lira Interest Expected to Increase Towards Year-End”
“The exchange rate has been stable for a long time, and the Turkish Lira is strong. I expect interest in and attractiveness of our local currency to increase further towards year-end. Despite recent upward movement, I expect the year-end dollar/TRY rate to remain in the 35-36 band, and the euro/TRY rate to stay around 38. This euro year-end forecast aligns with a stable currency outlook.”
“Central Bank Likely to Hold Rates Steady”
“Money market pricing suggests a high probability of the US Federal Reserve holding rates steady at its September 18th meeting. The Central Bank of Turkey will announce its rate decision on September 19th. I expect the TCMB to also hold rates steady at its September meeting. The disinflation process is ongoing, and base effects need to be observed, making it too early to make rate forecasts. However, if everything remains positive, we could see a rate cut by year-end.”
“Gold and Stocks Set to Rally”
“I don’t expect significant increases in the Dollar and Euro, but I believe the stock and gold markets will be active. Specifically, rising gold per ounce prices driven by FED rate cuts will boost gram gold in Turkey. The stock market is still undervalued, with significant potential. I believe stock investors will be pleased in the autumn period. Improving data will accelerate equity markets.”
“Turkey on the Right Track, Fitch to Upgrade Rating”
“All institutions evaluating Turkey this year have upgraded its rating. Fitch also upgraded Turkey’s credit rating in March after 12 years. They will release their second report on the Turkish economy on September 6th. Turkey is on the right track, and data is positive. Given the positive developments in macroeconomic indicators, I expect Fitch to implement another rating upgrade.”
“Economy Set to Reach a Better Level”
“The Turkish economy is improving day by day. Released data and macroeconomic indicators strongly suggest continued economic recovery. In the second quarter of the year, the Turkish economy grew by 2.5%. The disinflation process is progressing as expected. The current account deficit is narrowing. In this conjuncture, I believe the economy will reach a better level. 2025 will be the real recovery year for the Turkish economy.”
“Medium-Term Program (OVP) Working Well”
“Our economy’s performance to date has been consistent with the Medium-Term Program targets. This indicates the program is working, and the OVP is functioning effectively. I expect the new OVP to provide more confidence and morale to the market. I also believe the program will send clear messages about maintaining achieved gains and reaching future targets. The OVP, with rational and transparent policies, will take our country to a much higher level.”
“Disinflation Progressing Healthily”
“Annual inflation fell to 51.97% in August. This indicates disinflation is proceeding healthily. I expect inflation decline to accelerate further. The disinflation process will become more noticeable in the coming period. The autumn months are crucial for observing price declines. This year will see a significant slowdown in the annual inflation rate increase.”
“Investment Funds Outperforming Deposits”
“Naturally, investors are turning to funds offering higher returns. This year, investment funds have provided returns exceeding both inflation and deposit interest rates. I believe this trend will continue. I expect movement to persist in equity funds. Additionally, venture capital investment funds have good potential and are worth considering.”
“Take Medium and Long-Term Positions, Avoid Short-Term Speculation”
“The number of investors in our country has exceeded 8 million. For years, we sought answers to how to broaden participation in equity markets, and we have reached a point where capital markets have deepened and become more widespread in a short time. 75% of investors trading in equity markets have investments below 50,000 TRY. Small investors, in particular, should turn to transparent platforms where they can easily perform buy and sell transactions. Investors with limited financial literacy should invest amounts they can afford to lose, avoid buying at peak levels, and stay away from panic selling. They should take medium and long-term positions rather than short-term ones. If possible, they should seek professional help. This way, more accurate investments can be made, and potential grievances can be prevented.”
Rıdvan Baştürk – Baştürk Financial Consulting Founder
“High Interest Rates Have Negative Economic Repercussions”
“The high-interest rate policy implemented to reduce domestic inflation will inevitably have negative repercussions on the economy at some point. We have started to see this for some time. Problems are particularly evident in the industrial sector. We are also observing increases in unemployment. As a consequence of past missteps and policies, we may continue to see economic slowdown/cooling and job losses. These developments are the most significant factor pressuring the stock market. While the period until year-end seems short, it’s a long time for the market. Therefore, I don’t believe it’s healthy to specify a year-end level.”
“Awaiting Buying Opportunity in Gold”
“Although the dollar exchange rate has shown upward momentum recently, interventions are keeping the pace very slow. If the TCMB implements a rate cut before year-end, I expect upward movements to accelerate. Similar movements are expected for the euro, mirroring the dollar. The EURUSD parity trend will determine whether the dollar or euro will provide more returns. I generally expect a downward trend in EURUSD parity. Regarding gold, I have been bullish for a long time. Although there are periodic declines, I expect these dips to provide buying opportunities and the upward potential to continue.”
“TCMB Could Begin Rate Cuts Before Year-End”
“In the US economy, especially with the deterioration in employment, expectations for FED rate cuts have increased. A 25 basis point cut is likely in September. The subsequent process will depend on growth, employment, and inflation. I don’t think any TCMB decision will be contingent on the FED. For many years, the TCMB has been making decisions independent of global developments. As a result of the economic slowdown in Turkey, the TCMB may also start rate cuts at some point (before year-end).”
“Rate Cuts Will Positively Impact Dollar, Euro, Gold”
“The environment in which the TCMB starts the rate cut cycle will be crucial. It’s important whether rate cuts are due to economic growth and employment deterioration or inflation decline. Looking at inflation, I don’t believe a rate cut is necessary under current conditions. However, if economic deterioration deepens, the TCMB will feel compelled to cut rates. Regardless of the conditions under which rate cuts occur, they will have an upward effect on the dollar, Euro, and gold. For the stock market, things are a bit more complicated. If the economy doesn’t recover, the initial impact will be negative. In the longer term, a low-interest rate environment could positively impact the stock market.”
“Fitch Could Make Positive Revisions on Rating”
“Looking at Turkey’s current risk premium (CDS), Turkey’s rating should be at higher levels. The TCMB’s maintained tight stance, and the inflation decline partly due to base effects, could lead to positive revisions in Fitch’s outlook or rating.”
“Normalization Will Be Very Difficult”
“The low-interest rate policy implemented in previous years led to currency and inflation explosions. We are seeing changes in all price perceptions during this process. In this regard, normalization will be very difficult and time-consuming. The cost and consequence of this are economic slowdown, perhaps even recession, and job losses. Maintaining the TCMB’s stance during this process will be paramount. Subsequently, with falling inflation, things may get back on track, but this should not be expected to be immediate or easy.”
“No Clear Change in Household Price Perceptions”
“Economic slowdown and job losses are necessary conditions to curb inflation. However, we are not seeing a clear change in household price perceptions. Breaking this will require significant time and effort. I believe the TCMB’s inflation expectations are also below reality. We may end this year with inflation between 45-50%.”
Fund Recommendation
“Considering global and domestic conditions, economies are currently in a slowdown process. Therefore, I believe the share of fixed-income funds should be high. Alongside these, foreign currency and gold should be added. Equity share should remain low and gradually increased when declines occur.”
“Investors Should Avoid Risky Investments”
“We are in a period where difficulties are increasing both globally and domestically. These difficulties will continue to escalate rather than diminish. Therefore, risky investments should be avoided as much as possible, and savings should be increased as much as possible during this period.”