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For all the marvels of globalisation and independent central bankers, the world is still a very risky place.
Investors in Turkey have just received a sharp reminder of this. The country's main stock market index dived 4% yesterday, reacting to Sunday's warning from the army that it would "take action" if elections threatened Turkey's secular political system.
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Tom Stevenson in The Telegraph pulled out a nicely appropriate definition of emerging markets - "investments from which you can't emerge in an emergency."
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So should this be a wake-up call to complacent investors?
Threats of a coup in Turkey are not empty bluster. We might be talking about a country that's hoping to become a member of the EU in the not-too-distant future, but the military has forced four governments from power since 1960.
Now some might argue that it's quite reassuring that the generals are on the side of the secularists - better to have democratic freedoms compromised than to have Turkey slide the way of Iran, perhaps. Though history tends to show that the people will eventually have their way, whether the ruling powers like it or not.
But either way, as the recent coup in Thailand shows, regardless of how well-meaning their political interventions may be, the military are not great economic tacticians. The Thai stock market is among the cheapest in Asia at the moment, but investors remain reluctant to dive in after several ham-fisted attempts by the replacement government to manage the economy.
As Tom Stevenson points out in The Telegraph, none of this is to say that emerging markets are bad investments. They account for 80% of the world's population and 50% of GDP growth, yet just 8% of stock market capitalisation.
Economic growth is running about three times as fast as the developed countries, while inflation is largely under control - certainly by historic standards. In fact - and here's a scary statistic for all UK mortgage-holders - in Poland, inflation is running at just 2.2%. That's nearly a full percentage point less than the UK.
All this shows why excitement about the long-term case for emerging markets is justified. However, as Stevenson also points out, "markets around the world have already priced in this sketch of economic perfection." Up until yesterday, Turkey was the 11th best-performing stock market in the year-to-date. That's despite the fact that political upheaval has been threatening for some time.
As Bill Bonner has mentioned on more than a few occasions in the pages of MoneyWeek, the massive investment appetite for assets once deemed risky is evidence of a global credit bubble - too much money is chasing ever-diminishing returns.
However, the difficulty is in predicting when such a bubble will burst - and where it will hurt the most when it does. Stevenson recommends diversifying your holdings in emerging markets, which sounds like a reasonable starting point to us - and Asia in particular looks a good place to start.
We wrote about the appeal of Asia's markets - and its booming property markets in particular - in a recent issue of MoneyWeek, out now - subscribers can read more here: How you can profit from Asia's property boom.
And if you're not yet a subscriber, you can get access to all the content on the MoneyWeek website and sign up for a three-week free trial of the magazine, just by clicking here: Sign up for a three-week free trial of MoneyWeek.
Turning to the stock markets
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In London, the blue-chip FTSE 100 was bolstered by a resurgent mining sector yesterday and added 30 points to close at 6,449. International Power topped the leaderboard following positive broker comment from Lehman Brothers. Cable & Wireless was the day's second-best performer on speculation of a demerger raised by a report in The Observer. For a full market report, see: London market close.
Across the Channel, building materials stocks - including Saint-Gobain - led the CAC-40 29 points higher to a close of 5,960. In Frankfurt, the DAX-30 closed 30 points higher, at 7,408.
On Wall Street, stocks fell yesterday as investors consolidated April's strong gains and pondered weak economic data. The Dow Jones fell 58 points to end the day at 13,062. The Nasdaq suffered the heaviest losses, dropping 32 points to a close of 2,525. The S&P 500, however, gained 11 points to end the day at 1,482.
In Asia, the Nikkei closed 125 points lower today, at 17,274, although volume was low as many companies remained closed for the whole of the 'Golden Week' holiday.
Crude oil futures had fallen slightly to $65.63 this morning. In London, Brent spot was relatively flat at $66.96.
Spot gold had slipped to $678.00 this morning from $679.20 in New York late last night. Silver, meanwhile, had dipped to $13.42.
Turning to currencies, the pound was trading at 2.0008 against the dollar and 1.4677 against the euro this morning. The dollar was at 0.7334 against the euro and 119.57 against the Japanese yen.
And in London this morning, Imperial Tobacco announced a 6% increase in first-half profit to £421m and affirmed its intention not to 'overpay' for Spanish bid target Altadis. Shares in Imperial Tobacco had risen by as much as 8p, to 2,185p, today.
And our two recommended articles for today...
How central bank policy affects the gold price
- Investors traditionally turn to gold when high inflation threatens. But would you be better off sticking with cash and benefiting from interest rate hikes? For more on changing responses to inflation and what they mean for the gold market, read: How central bank policy affects the gold price
Will April heat bring a May retreat?
- The Dow Jones has broken through the 13,000 barrier and there's no doubt about it: the market's hot right now. But investors should beware of getting burned. To find out how markets have traditionally fared in the month of May and what developments to look out over the next few weeks, see: Will April heat bring a May retreat?
