NEW YORK (TheStreet) --The attempted military coup that took place in Turkey last Friday failed, yet questions remain about the country's economy and current account deficit.
Jim McCaughan, CEO of Principal Global Investors, thinks one of the immediate results from the events in Turkey will be a further decline in European treasury yields.
"Turkey is going to be a further impediment to the single market in Europe because it's close by and there is a lot of interaction," McCaughan said on Bloomberg TV's "Bloomberg Go." "It exacerbates the deflationary circumstances ... [which are] the key to valuation."
The political risk of emerging markets "was getting forgotten" McCaughan says, as this past weekend "will actually have a broader impact on all of the people who have become perhaps excessively bullish in the near-term in emerging markets in the last few weeks." He believes that emerging markets are only more stable underneath a "decades view," due to the amount of risk.
"The issue with Turkey looking forward will be that it still needs to finance a big current account deficit. It needs to be able to bring in capital," McCaughan noted.
Tragedies from terrorism over the past three months and the attempted to coup will result in "a big hit to tourism," hurting what McCaughan calls "one of their biggest industries." Turkey will continue to struggle to keep its economy moving as "the central bank can't do the usual accommodative monetary policy," which would lower interest rates and "make foreign funding of the current account deficit less likely."
"The forces of modernity in the army have been pushed down ... [which is] a purge I think will need to be watched for the future because I think that could hurt their relations with the west and hurt their economy," McCaughan added.