Despite threats to a fragile US recovery - resurgent consumer panic, a funding crisis, inflationary fears and worries over the dollar’s credibility as a global reserve currency - the outlook for both developed and emerging markets is optimistic, according to Jerome Booth, head of research at Ashmore.

The ability of the US Federal Reserve to convince the world that it is managing a recovery has been critical to the county's improving fortunes. Yet, says Mr Booth, there remains uncertainty in the form of stresses between deflationary pressures and market concerns over inflation, and the desire for more quantitative easing and dollar credibility.

"The main scenario is still one of gradual recovery in the US, no calamitous double dips, and gradual rebalancing of global exchange rates. But one should think in terms of different scenarios not just a single forecast. One should insure against the worst case scenarios, even if they are not the most likely. The best insurance is more exposure to emerging local currency debt," said Mr Ashmore.

The dollar, pound and euro need to be weak enough to support a consumer boom in Asian emerging markets. But that demand must be built by East Asian economies moving to more domestic demand-driven growth models. Such a move would solidify the V-shape of these economies’ recoveries and would increase the value of their currencies relative to developed regions.

As well as benefitting from the Europe/US recovery model, there are several reasons why emerging markets are set to gain from the western-born credit crisis, Ashmore says.

Not only are asset allocators choosing GDP weight over capital weight and discarding old biases to home-grown equity, says Ashmore, but risk is now so ubiquitous that there is no-longer much more risk involved in moving investment from a developed to a developing region than staying put.