The good news is that many market pros still see investments in the smaller countries of South America, Asia and elsewhere as reliable long-term plays.
But as recession fears take hold in the largest global regions and once-booming economies in China, India and Brazil start to cool off, developing countries remain at the mercy of the global turmoil.
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"We just think our economy and the potential European recession for next year does not bode well for the global economy," said Chip Cobb, portfolio manager at Bryn Mawr Trust in Bryn Mawr, Pa. "We like the emerging markets, but we think they're going to be lackluster until Europe gets its act together."This has been a difficult year for U.S. stocks and global equities in general. But it's been especially miserable for emerging markets. The Russell World Emerging Markets Index was off 4.1% in November alone and is down nearly 14% for the year, even though its three-year return is up a robust 21%. An exchange-traded fund widely used to track the so-called BRIC nations -- Brazil, Russia, India and China -- has performed poorly as well, falling more than 20% off its early July peak as the once-formidable bloc has come under increasing pressure from global debt distress. The iShares BRIC Index ETF (BKF), which mimics the index of the same name, also is showing signs of technical weakness, with another 8% drop likely, according to chart analyst Abigail Doolittle at Peak Theories Research. "Basically the emerging market economies have still been quite vulnerable to developments in the industrialized world. A lot of their world is export-driven," said Brian Gendreau, market strategist at Cetera Financial, an El Segundo, Calif.-based broker-dealer. "Will they be able to escape the downturn in developed countries? I don't think so." Still, Gendreau sees long-term prospects for developing economies, believing "there's still going to be quite a bit of growth in the emerging markets going forward."