Emerging markets had a gangbuster 2017, surging more than 37.5% with dividends reinvested, as measured by the MSCI Emerging Markets Index. 2018 has been much tougher. Emerging markets stocks entered bear market territory this month, marked by the index’s decline of 20% from its January 26 peak. The swoon has been building since Spring, precipitated by currency crises in Turkey and Argentina. Aside from the domestic troubles in those two countries, the general EM decline underscores changing dynamics evident across financial markets, which have benefited from years of central bank stimulus and, more recently, a period of synchronized global growth. Now, tightening U.S. monetary policy, a soaring U.S. dollar, concerns about a global trade spat, and slowing economic conditions outside the United States are exacerbating the stresses in many developing nations.

As fears of an emerging markets contagion grow, investors around the world are scrambling to weed out the weakest links and ascertain which economies might be able to weather the tempest . . .

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