Mr. Erdogan, for the first time in the last two decades, faced the Republican People’s Party as a strong opposition in the presidential elections. After the election board stated that the election would be decided in the 2nd round, the Turkish lira depreciated against the dollar as it was mentioned in the previous post. Along with the dollar and Euro, the CDS risk premium increased which indicates a higher risk premium and an increase in the country’s borrowing costs.

The uncertain environment with the results of the election, caused the markets to react negatively. With the harsh fall of Borsa Istanbul by 5 percent in the opening, the circuit was cut based on the index. The BIST 100 index decreased by over 6 percent in the opening. Experts state that the risks embedded in the markets will continue and they expect that the sales pressure will keep up.

In our current state, where the elections remain in the second round regardless of the majority in the parliament, the first pricing may be against TL assets and the stock markets due to uncertainty. There may be a slowdown in the formation process of a new government. So at this stage, the stock market may continue its movement at its current levels by implementing a “wait and see” policy, however, downside risks are most likely to outweigh. Throughout the following two weeks, I think that political developments and statements will direct the stock market. While the 2023 elections are quite different from the other elections, the movement of markets in the previous elections may enlighten us on our predictions. For instance, in the 2018 presidential and Deputy General Elections, the stock markets fell due to political uncertainties in the pre-election period, however after the election the stock markets reacted positively and BIST 100 index increased by 3%.

As a result, within the uncertainty of our current state, there can be many different scenarios for what post-election markets will be. The stock market may rise as a result of a strong plan for the post-election economy being announced, and markets can react positively. Also, the unexpected results that may occur depending on the 2nd round may cause fluctuations in the stock market too. It is not reliable to predict short-term movements of the stock markets, instead, it would be wiser to create a diversified investment portfolio, opt for defensive shares, and invest from a long-term perspective. Therefore, the uncertain environment and the effect of elections on stock markets may vary depending on the results and economic policies of the future government. However, according to past data and with the disappearance of uncertainties in general, I think the markets are most likely to react positively after the election.