Volatility has returned. So far this year, the S&P 500 is up about 5 percent. The average emerging markets stock fund, by contrast, is down about 4 percent, according to Morningstar. "What you're seeing is investors reallocating—taking from where they've done very well, and then reallocating their portfolios," Krosby says.
Until recently, emerging markets stocks have crushed U.S. large-cap stocks. From Dec. 31, 2001, through the end of 2010, the MSCI BRIC Index, which tracks the returns of markets in Brazil, Russia, India, and China, delivered an annualized 10-year return of 18 percent, compared with a 1.4 percent annualized return for the S&P 500, according to Factset. That trend is reversing itself somewhat as new risks like inflation and unrest have emerged as challenges for governments in the region. "Volatility is not dead in the emerging markets," Coté says.
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Europe's sovereign debt problems. Outside of U.S. stocks, one of the best-performing asset classes this year has been European stocks. On average, European stock funds are also up almost 5 percent year-to-date. For now, investors seemed to have shrugged off concerns about debt-ridden countries like Ireland and Greece that have recently taken bailouts to tackle crippling budget deficits. Krobsy notes that the German economy has also benefited from higher global growth because many companies in that country rely on exports. Germany's Dax Index is up almost 7 percent year-to-date.
But experts say the debt problems in Europe have only taken a backseat for the short term. European Union countries will have to decide what to do about the struggling countries. "The European sovereign debt crisis isn't going away any time soon," Sonders says.
Corrected 2/17/2011: A previous version of this story incorrectly stated the date of the S&P 500 low. It was in March 2009.