The long-term case for emerging market equities is compelling, for reasons that I've covered previously. A diversified portfolio should have an allocation to this area, with the range dependent on one's risk tolerance and historic valuations. However, this area has tended to be more volatile than major indexes in developed markets.
EM equities have been in a sustained uptrend relative to developed markets. The relative performance of EM equities versus the MSCI World Index in particular continues to be above its 200-day moving average. But with equity markets rising sharply along with investor sentiment, one should monitor this area closely for signs of a reversal.
With the financial crisis in Europe seeming to abate for now and most U.S. banks passing the "stress test" this week, investors seem unusually complacent. I still advise raising some cash at current levels.
S & P 500: 1398