Emerging Markets Aren't a Monolith

The Latin economies have had the wind at their backs for the past four years, with low interest rates in the U.S. fueling demand for Latin labor, products and commodities. Wage growth among Latin immigrants has been second only to oil exports as a generator of growth.

Yet the risks are large, observed Bassini, and fortunes could easily be reversed. If the U.S. economy turns downward, says Nicholson, the Latin economies, especially Mexico, will have difficulty avoiding recession. Even China's economy, she thinks, could face problems once the boon from hosting next summer's Olympic Games has passed.

Nevertheless, there are reasons to remain bullish about emerging markets -- the BRICs in particular -- no matter what may happen in the U.S. economy. At worst, speculated Fortress Investment's Swati, China's economic growth rate might decline from its current 11% to a still-torrid 8%. As for emerging market exports, the threat of a U.S. economic downturn will loom large over the next eight to 12 months, but it will surely diminish over the next decade, as emerging markets develop stronger consumer economies of their own.

Knowing where to go next with investment capital is always a challenge. Nations go through changing cycles, Kaplan said, with each new developmental phase providing a new growth engine. Israel, for example, began as a largely agricultural economy in the 1940s and 1950s, before becoming a producer of industrial goods. More recently, its economic growth has been fueled by technology -- a leap that countries like Singapore and Taiwan are now poised to make as well.

Nations that can export valuable natural resources may be able to graduate from one developmental phase to the next with greater ease, Kaplan thinks, but all nations aspire to the same developmental trajectory, and they should be able to attract increased foreign investment capital as they progress.

Regardless of how much of a near-term slowdown the world's developed economies may be about to experience, the faster-growing emerging markets seem likely to maintain momentum. Goldman Sachs forecasts that the BRIC economies will exceed the U.S. in consumer spending this year, with China leading the way. China's average per capita income has now surpassed $1,700 and, as with per capita incomes in Russia, India and Brazil, the growth shows no signs of abating.

Meanwhile, the world's economic balance of power has already begun to shift, as the oil-rich nations rake in ever larger quantities of wealth and the Asian central banks acquire enormous pools of capital -- with growth in Asian pension funds and private investment vehicles sure to follow. "All this liquidity," Leeds concluded, "will have to go somewhere."

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