Emerging markets have been acting as the engine for the global growth for past many years. Their economies are growing in high single digit or double digit in some cases. However, looking at the performance of their stock markets, you wouldn’t be able to make that determination.

Here is their performance since Feb ’08. The chart uses country/region specific ETFs. Clearly, S&P500 (SPY) stands out as the best performer. Next best is Mexico and its economy is strongly influenced by the Unoted States. The worst performer is the Euro STOXX 50 ETF – obviously plagued by sovereign debt crisis – followed by India, Brazil and China.

If we dig deeper then we find that the comparative case is not so straight forward. During times of global upheaval, emerging markets have been lagging. When the global storms were tamed, the emerging economies were leading.

The chart below shows how all these country ETFs performed in the tumultuous 2008 compared to SPY (baseline). Clearly, Japan, the developed economy withstood the financial storm better than SPY. It outperformed SPY by 5%. All others underperformed. Canada’s economy is driven mostely by oil and natural resources and they did not fare well in 2008. India and Brazil did worse by more than 25%.  Latin America and Emerging Market ETFs underperformed by more than 15%.

When the global markets calmed down in 2009, the change of scenery was vastly different for emerging markets. Here is how they performed relative to SPY in the upbeat 2009 (after March). Brazil and India were the leader in 2009 by far, outperforming SPY by over 80%. They were followed by the Latin America and Emerging Market ETF. Japan was the only ETF that performed worse than SPY.

2011 was another year which saw lot of volatility driven by European debt crisis and the self-induced wounds of the debt-ceiling drama that played out in the US Congress. The ETFs reversed their 2009 performance and mirrored 2008 one.

Wisdom Tree India ETF was the biggest laggard – under performing SPY by 40% – followed by Brazil, which underperformed SPY by over 20%. Rest were all bunched together.

This year, again, is not shaping up well for the emerging markets. They did quite well in the first quarter but when the Greek debt tragedy started to kick in, their performance started to fade away compared to SPY.

India was outperforming SPY by over 25% but is now under performing. Brazil was up more than 12% vis-a-vis SPY and now it is doing almost 15% worse.

The European crisis is putting some damper on the global economy, which is still driven a lot by the emerging markets. It is fair to say that once the storm due to European sovereign debt crisis subsides then the emerging market will again take the leadership. Going by their past record, India, Brazil and Latin America may outperform SPY significantly.