INVESTMENT professionals who said "Sell South Africa and search for opportunities in New York or London" about 10 years ago were proved quite embarrassingly wrong when you compare the performance of the JSE’s all-share index against those markets. In hindsight, it wasn’t such a great idea, even for those companies such as Investec and Old Mutual that chose London pavements over leafy Cape Town office parks.

Against their rivals that focused on their South African operations, both have underperformed.

Over the past 10 years, the S&P 500 index has gained close to 57%, while the FTSE 100 has managed to gain nearly 50%.

Compare that with the all-share index, which has gained more than four times in value over the same timeframe and you get the picture. It’s been an emerging-markets story over the past decade, and compared with the Brazilian Bovespa index — a list of the most liquid stocks traded on the São Paulo Stock Exchange — our local market has actually underperformed.

The São Paulo index has gained 460% in 10 years.

On Tuesday, the all-share index continued its upward momentum, closing at yet another high.

The Bovespa index was still about 19% off its 2008 high by late afternoon, but has gained more than 5% this year.

Just looking at those numbers alone, it’s perhaps time to dust off those early 2000 analyst presentations of the promise of US and European markets versus the local one. It’s not to say people should start fleeing, but a closer examination is warranted. It’s especially the case if the US starts to show sustainable recovery and unemployment continues to fall. Consumer spending accounts for about 70% of the US economy.

Minus political grandstanding between the Democrats and Republicans over the fiscal cliff, data from the US has been more encouraging. On Tuesday, the Institute for Supply Management said US manufacturers were more optimistic about sales and spending next year than service providers, signalling that factories would support the economic expansion after they slumped in recent months. Job openings in the US climbed to a four-month high in October, indicating the labour market was on the mend.

The number of positions waiting to be filled rose by 128,000 to 3.68-million from a revised 3.55-million the prior month, the US labour department said. Figures from the US make for much better reading than our local data, which is moving from bad to worse.

It’s only a matter of time before companies that derive most of their earnings locally start to reflect the underlying situation on the ground. The strength in the JSE is much more broad-based than some give it credit for.

Both South African-specific stocks and those with an African story, such as Tiger Brands, have been reaching new record highs.

Bidvest is another.

With consumer spending expected to come under severe pressure in the weeks and months to come, analysts are going to have to look at revising their earnings expectations. South African growth in retail sales slowed more than expected in October, rising a percent from a year earlier.

The median estimate in a Bloomberg survey of 10 economists was for growth of 4%.

Other emerging markets have also found growth hard to come by in recent months, especially in Brazil, where economic reading has been just as uncomfortable as in South Africa. The world’s sixth-biggest economy posted third-quarter growth of just 0.6% far below expectations.

According to The Economist, Brazil is experiencing its worst growth in a more than decade. Its economy makes a good comparison with South Africa because of its commodity slant and the reliance on a strong and growing China. They also have high electricity prices that have scared off some investors in Latin America’s biggest economy.

For both South Africa and Brazil, there’s now a definite mismatch between the performance of the economy and the equity market.

With the outlook for next year still gloomy with the European Central Bank only expecting the region to fully emerge from recession the following year, emerging market economies are likely to continue struggling. Logic tells me that there quite simply has to be a point where the slowdown starts to eat into company profits.

Foreign investors who have been key to the rally across emerging markets will start closely scrutinising their exposure when the US Federal Reserve starts talking of the possibility of higher interest rates. Chairman Ben Bernanke has pushed that possibility off until late 2014 to 2015, but things do change.