Think you’ve been having a tough time in the stock market lately? A lot of people do. Over a recent nine-day stretch, the S&P 500 Index dropped by more than 1% three times.

However, lost among the ensuing doomsday prophecies is an inconvenient truth. Even after those big losses, the index was still up nearly 15% for the year.

That’s about 50% above its long-term average annual return of roughly 10%. And we’re still not two-thirds of the way through the year.

If you can’t take it anymore, sell all your stocks and consider yourself lucky to have made it this far. Investors have become spoiled. That’s what 10 years of a nearly uninterrupted bull market will do to you.

If you really want to see what financial hardship looks like, take a peek south towards Argentina.

As Argentina grapples with political and economic crises, the country’s woes could trigger an international financial contagion. Below, I’ll examine the extent of the danger and how to protect your portfolio

The list of worst-performing stocks trading on U.S. exchanges on Monday, August 12, was led by this quartet of Argentinian companies:

• Grupo Financiero Galicia S.A. (NSDQ: GGAL) -56.1%
• Banco Macro S.A. (NYSE: BMA) -52.9%
• Telecom Argentina S.A. (NYSE: TEO) -33.8%
• YPF Sociedad Anonima (NYSE: YPF) -30.7%

As a group, these four stocks lost an average of more than 43% in a single day. That hurts.

By the way, these aren’t a bunch of go-for-broke penny stocks. In fact, just the opposite. They represent some of Argentina’s largest and most respected companies in the banking, telecom, and energy sectors.

Regardless, none of them could get out of the way of the massive devaluation of the Argentina peso that occurred that day. The driving force behind Argentina’s attempt to stabilize its economy, President Mauricio Macri, lost a critical primary election over the preceding weekend.

Black Monday in Buenos Aires

Why does this matter to you? Because the events that led to this shock wave could be a harbinger of things to come in other nations with strong ties to the global economy.

What brought Argentina’s stock market crashing down was the refusal by its citizens to accept the economic austerity measures Macri implemented to end government corruption and bring its budget under control.

For too many years, a small number of the country’s well-connected bureaucrats and corporate executives raided the federal treasury for their personal gain. All the bribes and price-fixing that went into those transactions over the past couple of decades ultimately made their way into the federal deficit.

Last year, the country accepted a $57 billion loan from the International Monetary Fund (IMF) that required Argentina to eliminate its federal deficit by the end of this year. To accomplish that, Macri had no choice but to clamp down on government spending.

As a result, Argentina’s unemployment rate soared above 10% in June for the first time in more than 20 years. At the same time, its gross domestic product (GDP) per capita fell to its lowest level in 10 years.

At the end of last year, Argentina’s GDP was at its lowest level since 2010 after reaching an all-time high in 2017. Once Macri accepted the IMF loan and turned off the government spigot, the well quickly ran dry.

Last weekend’s election was the match that sparked the fire. The citizens of Argentina decided they want their old economy back, even if it results in runaway inflation.

As the old saying goes, be careful what you wish for. The following day, the Argentina Peso lost 30% of its value while its national stock market index (MERVAL) fell by 38%.

Next in Line

You probably don’t have much exposure to Argentina in your investment portfolio. It represents less than 1% of the world’s economic output so it has minimal weighting in most international stock funds.

That’s the good news. The bad news is there may be more Argentinas to come as the global economy weakens.

The extended trade war between the U.S. and China has repercussions that reach around the globe. Those two countries have huge economies that can readily absorb a temporary blip in productivity, but not so for all of their respective trading partners.

Of the G20 nations, only four have unemployment rates higher than Argentina’s: South Africa (29%), Spain (14%), Turkey (13%), and Brazil (12%). That makes their populations less likely to accept short-term economic austerity measures as a means of improving their long-term global financial standing.

Of those four, only South Africa has an economy smaller than Argentina’s. But the other three — Spain, Turkey, and Brazil — have a combined GDP that would rank them fourth among the G20 nations behind only the United States, China, and Japan.

It’s too soon to panic, but it’s not too soon to take action. If you own international stock funds, take a look at how much exposure they have to countries that may be on the cusp of an economic revolt.

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