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Major stock markets had a down year in 2011, although in the U.S. the Dow managed a 5.5% gain.

"In 2012, you had completely the opposite," said money manager Nicholas Vardy, who tracks 37 country exchange-traded funds for his London-based firm, Global Guru Capital.

Almost all global markets were ahead in dollar terms in 2012, with many outpacing the U.S.

Now Vardy believes a more fundamental shift is under way: Emerging markets, which have lagged badly (as I have pointed out repeatedly), are outperforming again.

And the best developed markets in 2013 may well be -- are you sitting down? -- in Europe, especially its toxic southern debt belt of Spain, Italy and Greece.

I know that's hard to believe, and I'll go into more detail later. But first the easy stuff -- emerging markets.

Emerging markets, Vardy told me, vastly outperformed the U.S. for much of the past decade. But when the financial crisis hit in 2008, they fell behind and took a nasty spill in the summer sell-off of 2011.

But though emerging-markets stocks trail their U.S. counterparts over the past few years, Vardy said there are signs of a reversal.

"The last three months it's shifted (back)," he told me. "Emerging markets and global markets in general have put in a very strong showing, and their outperformance has begun."

Why? It's simple: risk.

Global markets have rallied since the Federal Reserve announced its latest round of bond buying and, before that, European Central Bank president Mario Draghi vowed to do "whatever it takes" to backstop the debt of shaky European economies. It's been one big "risk-on" trade ever since.

"Global stock markets are the ultimate 'risk on' asset," Vardy wrote in a post on his website. "When the U.S. stock market does well, global markets tend to do even better."

"Investment in (emerging markets especially) is driven more by risk appetite than by fundamentals," he wrote. (Full disclosure: A family member of mine invests in a fund Vardy runs.)

Risk comes reward

Over time, emerging markets have a "beta" (how much they move against U.S. stocks) of 1.3 to 1.6 times that of the Standard & Poor's 500 Index ($INX) . So, should the S&P 500 rise 10%, emerging markets could gain as much as 16%. But they would fall harder than U.S. stocks in a downturn.

That extra beta -- plus the higher growth rates of these economies -- is behind the spectacular numbers some of these markets post in good years.

 "You're going to be rewarded for taking on more risk," Vardy said.

For example, in 2012, the MSCI Turkey index left everyone in the dust -- up 60.5%, followed by Egypt and the Philippines, which both surged about 44%.

Vardy still likes the Philippines -- an exchange-traded fundproxy is iShares MSCI Philippines Investable Market Index (EPHE) . He also favors investing in Vietnam, which, he said, is "completely going nuts." The Market Vectors VietnamETF (VNM)  has skyrocketed more than 30% since November.

Meanwhile, the overhyped BRICs (Brazil, Russia, India and China), which captured investors' imaginations for a decade, now have a split personality. India soared 23.9% in 2012, and China racked up a 19% gain, while Russia lagged and Brazil, once the hottest major market, was one of only a few to lose ground in dollar terms last year.

I'd rather buy a broad-based emerging markets ETF, such as iShares MSCI Emerging Markets Index (EEM)  or Vanguard FTSE Emerging Markets (VWO) . In fact, I'm adding more emerging markets exposure to my own portfolio, although I'd keep it below 10% of your equity exposure -- and I'd wait for a pullback, given how far they've advanced.

Among developed markets, Vardy likes the Northern European bastions of Germany and the Nordic countries.

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Contrarian opportunities

But if you're more of a high-roller than I am, he sees contrarian opportunities in the most unlikely places -- Greece, Italy and Spain.

The iShares MSCI SpainIndex (EWP)  dipped below $20 on July 24, 2012, just before European Central Bank President Mario Draghi's"whatever it takes" statement; it has advanced almost 60% since then, while iShares MSCI Italy Index (EWI)  has soared 50%.

"It's probably reasonable to assume that if the European crisis is over, Spain would be an opportunity," Vardy said.

In fact, the U.S. debt limit debate is probably a bigger political risk to markets than the eurozone is right now.

But the real surprise: Global X FTSE Greece 20 ETF (GREK), which has more than doubled since its lows last June.

Despite stagnant or negative growth -- both Spain and Greece suffer Depression-level unemployment of 25% -- these markets have taken off as bond yields plummeted: Spain's 10-year bond yields less than 5% and Italy's is just above 4%. That's way below Spain's 7.75% peak and Italy's 6.6% pinnacle last July.

And Greece's deal in November 2012 to buy back bonds from investors has lifted financial markets, although its people are still struggling.

All three "Club Med" countries have come a long way, so I'd wait for a pullback before committing new money. And quite frankly, they're so risky -- especially Greece -- that I might not have the stomach to invest in them. If you do, I wouldn't commit more than 1% of your investable money.

But if the eurozone crisis is really over and these economies are making a long, slow comeback, there could be big, big money to be made.

No guts, no glory, as they say.

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