Unlike the S&P 500, the MSCI Emerging Markets index has yet to reclaim its 2007 peak. Emerging markets can fall harder than developed in risk-off bouts, but they can also outperform when the global economy is humming.

"Emerging markets had a nice run that started in early 2009 and lasted up until the summer of 2011. Then the market started worrying about a Greek default and the Eurozone credit crisis, which threw a curveball to emerging markets," Yorke said.

As a group, developing markets are way behind the S&P 500 this year but have made up lost ground since the end of August.

"Emerging markets have never been known for their lack of volatility, but they're a box you want to check on your overall asset allocation" Yorke said. "There will be periods of underperformance when emerging markets are out of favor, but they're still an important part of a global diversified portfolio."

The good news is that emerging markets are offering more attractive valuations after lagging the S&P 500 for so long.

Other positive fundamental factors for developing markets include higher economic growth rates combined with rising consumption and a middle class, Yorke said.

Photo Credit:aashek

DISCLAIMER: All investments involve risk and various investment strategies will not always be profitable. International investing involves special risks, such as political instability and currency fluctuations. Past performance does not guarantee future results.
Tom Yorke

Tom Yorke

Oceanic Capital Management, LLC is a registered investment adviser based in New York. I am Tom Yorke, Oceanic's Managing Director.


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