After years of underperformance, this could be the time for a rebound in the turmoil-driven markets of Greece, Spain, and Egypt, among others...but don't bet the house on it, writes MoneyShow's Howard R. Gold, also of The Independent Agenda.

In 2011, every major stock market in the world was down, except one-the US, which eked out a gain of less than 1%.

 "In 2012, you had completely the opposite," said money manager Nicholas Vardy, who tracks 37 country exchange traded funds for his London-based firm, Global Guru Capital. Nearly all global markets were ahead in dollar terms in 2012, with many outpacing the US.

Now, Vardy believes a more fundamental reversal is under way: Emerging markets, which have lagged badly (as this column has pointed out repeatedly), are outperforming again.

And the very best developed markets in 2013 may well be-are you sitting down?-in Europe, especially its toxic southern debt belt of Spain, Italy, and Greece.

I know that's hard to believe, and I'll go into more detail later. But first the easy stuff-emerging markets.

Emerging markets, Vardy told me, vastly outperformed the US much of the past decade. But when the financial crisis hit in 2008, they fell behind and took a nasty hit in the summer sell-off of 2011.

But though they still trail the US over the last few years, Vardy said there were signs of a reversal.

"The last three months it's shifted [back,]" he told me. "Emerging markets and global markets in general have put in a very strong showing, and their outperformance has begun."

Why? It's simple: risk. Global markets have rallied since the Federal Reserve announced its latest round of bond buying, and before that, European Central Bank president Mario Draghi vowed to do "whatever it takes" to backstop the debt of shaky European economies. It's been one big "risk-on" trade ever since.

"Global stock markets are the ultimate 'risk on' asset," Vardy wrote in a post on his Web site. "When the US stock market does well, global markets tend to do even better."

"Investment in [emerging markets especially] is driven more by risk appetite than by fundamentals," he wrote. (Full disclosure: a family member invests in a fund Vardy runs.)

Over time, emerging markets have a "beta" (how much they move against US stocks) of 1.3 to 1.6 times the S&P 500 index. So, should the S&P rise 10%, emerging markets could gain as much as 16%. But they would fall harder than US stocks in any downturn.

That extra "beta," plus the higher growth rates of these economies, are behind the spectacular numbers some of these markets post in good years.

"You're going to be rewarded for taking on more risk," said Vardy.

NEXT: Who Will Be the Big Winners?

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In 2012, the MSCI Turkey index left everyone in the dust-up 60.5% in dollar terms-followed by Egypt, that fount of political stability, and the Philippines, both surging around 44%.

Vardy still likes the Philippines, whose ETF is the iShares MSCI Philippines Investable Market index (EPHE). He also likes Vietnam, which, he said, is "completely going nuts." The Market Vectors Vietnam ETF (VNM) has skyrocketed over 30% since November.

Meanwhile, the overhyped BRICs (Brazil, Russia, India, and China), which captured investors' imaginations last decade, have a split personality. India soared 23.9% in 2012, and China racked up a 19% gain, while Russia lagged and Brazil, once the hottest major market, was one of only a few to lose ground in dollar terms last year.

I'd rather buy a broad-based emerging markets ETF, like iShares MSCI Emerging Markets Index (EEM) or Vanguard FTSE Emerging Markets (VWO). In fact, I'm adding more emerging-markets exposure to my own portfolio, although I'd keep it below 10% of your equity exposure-and I'd wait for a pullback, given how far they've advanced.

Among developed markets, Vardy likes the northern European bastions of Germany and the Nordic countries.
But if you're more of a high roller than I am, he sees a contrarian opportunity in the most unlikely places-Greece, Italy, and Spain.

The iShares MSCI Spain Index (EWP) dipped below $20 on July 24, just before Draghi's "whatever it takes" statement; it has racked up nearly a 60% gain since then. iShares MSCI Italy Index (EWI) has soared 50% during that time.

"It's probably reasonable to assume that if the European crisis is over, Spain would be an opportunity," said Vardy.
In fact, the US debt limit debate is probably a bigger political risk to markets than the Eurozone is right now.

But the real surprise is the Global X FTSE Greece 20 ETF (GREK), which has more than doubled since its lows last June.

Despite stagnant or negative growth-both Spain and Greece suffer Depression-level unemployment of 25%-these markets have taken off as bond yields plummeted: Spain's ten-year bond yields less than 5% and Italy's is just above 4%. That's way below Spain's 7.75% peak and Italy's 6.6% last July.

And Greece's deal last November to buy back bonds from investors has lifted financial markets, although its people are still struggling.
All three Club Med countries have come a long way, so I'd wait for a pullback before committing new money. And quite frankly, they're so risky-especially Greece-that I might not have the stomach to invest in them. If you do, I wouldn't commit more than 1% of your investable money.

But if the Eurozone crisis is really over and these economies are making a long, slow comeback, there could be big, big money to be made. No guts, no glory, as they say.

Howard R. Gold is editor at large for MoneyShow.com and a columnist for MarketWatch. Follow him on Twitter @howardrgold and catch his commentary on the economy and politics at www.independentagenda.com.