Global Investor: Waiting for That Big 'Pop'; Is the Emerging-Markets Boom Now a Bubble, and Is It Ready to Burst? for an Important Clue, Take the Temperature of the U.S. Economy

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Byline: Ruchir Sharma (Sharma is co-head of global emerging markets at Morgan Stanley Investment Management.)

There is only a fine line between euphoria and acrophobia. And most emerging markets are currently torn between the two sensations. Emerging-market stocks have been the asset class of choice this decade, rising by nearly 200 percent over the past three years. However, the rally in many of these markets has been fueled largely by ebullient foreign investors, who have poured in more than $150 billion during this period. Even today, domestic investors think this "levitation act" just can't last.

Both sides make equally strong arguments on whether the rally is peaking. Valuations in most emerging markets are at the …