A new article in the IMF’s Finance & Development journal brings some fresh analysis and numbers to an old theme: emerging markets are hot and they’re reshaping the global economy. We’ve heard the story before, but the details are no less no impressive.

“The superlative performance of emerging market economies, a group of middle-income countries that have become rapidly integrated into global markets since the mid-1980s, has been the growth story of the past decade,” write M. Ayhan Kose (assistant to the director in the IMF’s research department) and Eswar S. Prasad (professor of trade policy at Cornell University). “After being beset by various crises during the 1980s and 1990s, emerging markets came into their own during the 2000s, recording remarkable growth rates while keeping inflation and other potential problems largely under control.”
There is a wide variety of economic statistics that illustrate the powerful rise and evolution of emerging markets. One of the more impressive set of numbers is the strength these countries demonstrated in the Great Recession. In fact, there was no recession in emerging markets, as a chart from the Finance & Development illustrates:

No wonder that the emerging nations of the world are grabbing a larger share of global GDP in relative and absolute terms. “During 1960–85, advanced economies on average accounted for about three-quarters of global GDP measured in current dollars adjusted for differences in purchasing power parity across countries,” Kose and Prasad report. They go on to advise:

This share has declined gradually over time—by 2008–09, it was down to 57 percent. In contrast, emerging markets’ share has risen steadily from just about 17 percent in the 1960s to an average of 31 percent during the period of rapid global trade and financial integration that started in the mid-1980s. By 2008–09, it was close to 40 percent.

Even so, broad macro trends don’t dictate the ebb and flow of capital markets in the short term. As this year’s investment returns show, the emerging markets theme isn’t a monolith of above-average performance:

One year-to-date period doesn’t tell you much, of course, although it does remind that variety is a constant, with an evolving set of leaders and laggards. It’s one thing to recognize the influence of broad macro trends. It’s quite another to assume that there’s easy money associated with the theme, or that today’s winners will remain written in stone.
The American consumer was the dominant story over the past half century. Recognizing that economic force was critical, but it was hardly a short cut to big profits in every short-term period. No less will be true for the ongoing rise of emerging markets. Meantime, there’s the old problem of uncertainty, which is constantly lurking. Two decades ago there was an army of analysts forecasting that Japan would take over the world and deliver the premiere economic model. How’s that prediction working out for ‘ya these days?
Sure, the emerging market outlook is different, and probably a lot more durable. But no one should be the farm on one prediction, one region, one asset class–one anything. Even in 2010, when emerging markets generally have performed quite well, there’s been a fair amount of variation in year-to-date returns through December 15. Expect more of the same in the months and years ahead.
There will be winners and losers in emerging markets, just as there will be among mature economies. Same old, same. Some trends are forever.