Turkey currency crisis: What it means for stock market and 401(k)s

Just as the bull market for stocks is set to become the longest in history, U.S. investors are confronted with another crisis from a far corner of the world.

What's giving Wall Street the jitters this time is Turkey's plunging currency, which is down about 40 percent this year against the dollar.

Despite a brief respite and nearly 8 percent rebound Tuesday, the Turkish lira's free fall is causing acute economic pain in that country's economy, the world's 17th largest, and sowing fears that Turkey's woes will spread to other countries.

Those concerns are already undermining confidence in global financial markets and causing asset prices to fall, especially in emerging markets and Europe. The damage has been more muted in the U.S., however, where the Dow Jones industrial average rose 112 points Tuesday, making up some of the ground lost the prior two trading days, when it shed more than 300 points.

Could Turkey's currency crisis grow more damaging for Americans, upending 401(k) accounts and derailing the broad U.S. stock market, which has delivered hard-earned gains of 6.2 percent this year after rallying more than 19 percent last year?  

The turbulence in Turkey bears watching, for sure, and will make it harder for that country to pay off its sizable debt of dollars held by global banks with its weakened lira, but investors need to keep things in perspective, Wall Street pros say.

While there's always a chance that so-called financial "contagion" can occur and turn one country's misery into a broader problem, it's unlikely the turmoil will infect the U.S. economy, corporate earnings or stock market in a major way.

"We are not expecting that the situation in Turkey will deteriorate to the extent that it poses a threat to the world economy," John Stoltzfus, chief investment strategist of Oppenheimer Asset Management, wrote in a research report.

More: Amid Trump dispute, Turkey's President Recep Tayyip Erdogan urges iPhone boycott

More: President Trump hits Turkey with heavier tariffs on steel and aluminum

And when it comes to downplaying the contagion risk as a bull market killer, Stoltzfus is not alone.

In a report titled, "Is Turkey A Game Changer?" Chris Verrone, a partner at New York-based investment firm Strategas Research Partners, reminds investors that the resilient bull this year alone has survived a number of scares.