If one focused his/her attention solely on year-to-date performance, he/she might eschew foreign stock ETFs altogether. With the S&P 500 SPDR Trust (SPY) and the iShares S&P Mid-Cap 400 (IJH) garnering 18% and 22% respectively, who needs to dabble in emerging markets? After all, Vanguard Emerging Markets (VWO) registered a dismal 9-month showing of -8%.

Think about the discrepancy for a moment. Stock assets around the globe have a tendency to move in the same direction. Yet, broad-based emerging market ETFs have been a drag on investment portfolios. And there’s more. During the 10/2002 – 10/2007  bull market period, emerging market equities provided 3x the upside of their U.S. counterparts. In complete contrast, over the last two years, U.S. stocks have provided 3x the upside.

On the other hand, if one looks beyond recent disappointments, as well as record ETF outflows in August, the reemergence of emerging markets may soon become the hot story. Not only did broad gauges like VWO appear to bottom out in late August, but resources-related ETFs skyrocketed on a 3-month basis.

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