In just his second regularly scheduled press appearance, US Federal reserve chairman Ben Bernanke voiced what is common knowledge to any American: The US job market remains weak. Speaking after a meeting of the Federal Open market Committee (FOMC) on June 23, Bernanke painted a grim picture of the housing market while nothing that inflation had picked up. He also warned lawmakers that drastic cuts to federal spending could slow the economic recovery in the near term.

These were ostensibly counterintuitive pronouncements, Bernanke and the FOMC had just decided to let the Fed’s second round of quantitative easing terminate on the last day of June. Meanwhile, Bernanke declared that the Fed’s benchmark rate will remain near zero for “an extended period of time.”

While Bernanke and his colleagues try to re-inflate the US economy, on the other side of the Pacific, Chinese policy makers have pulled out all the stops to cool down their country’s red-hot economic growth.

The RMB4 trillion (USD617 billion) stimulus program launched in the early days of the financial crisis helped China mitigate the worst effects of the Great Recession. But that government spending program, combined with workers’ demands for higher wages, have created potent inflationary pressures that could threaten the primacy of the Chinese economic juggernaut.

Investors face a conundrum: economic weakness in the developed world paired with rising inflation in emerging markets. Those seeking to deploy their investment dollars may feel as if they must choose between the lesser of two evils. But on balance, the Western Hemisphere remains a risky place in which to invest. It’s time to venture beyond developed markets for attractive returns. These exchange-traded funds (ETF) will help you make that journey.

Emerging Opportunities

About one of every 10 Americans is unemployed or underemployed. Wage growth in Europe has stagnated and a generation of young Europeans has struggled to find work. Developed-world consumers have long powered global economic growth. But in the current environment, consumers in emerging markets are the ones with cash to burn.

The developed world continues to grapple with irresponsible government spending programs and astronomical leverage built into the financial system. In contrast, the balance sheets of many emerging-market countries look rock solid. These nations endured fiscal crises in the 1980s and 1990s and consequently avoided many of the excesses that developed nations fell victim to in the new millennium. These emerging-market countries also implemented economic reforms that insulated them from the worst of the credit crisis. The result: Emerging economies posted robust growth throughout the financial crisis as the West slipped into recession.

In addition to rising earnings power, emerging markets boast a growing population of consumers in their prime spending years. This compares favorably to demographic trends in the West, where populations are declining and aging. Rapid urbanization in emerging markets is also fueling the growth of the middle class, many of whom have seen their discretionary income surge. As a result, consumer spending in emerging markets amounts to almost $7 trillion annually. That number is expected to grow to $20 trillion by the end of the decade.

In addition to rising earnings power, emerging markets boast a growing population of consumers in their prime spending years. This compares favorably to demographic trends in the West, where populations are declining and aging. Rapid urbanization in emerging markets is also fueling the growth of the middle class, many of whom have seen their discretionary income surge in recent years. As a result, consumer spending in emerging markets is currently estimated to be almost $7 trillion annually. That number is expected to grow to $20 trillion by the end of the decade.

EGShares Dow Jones Emerging Markets Consumer Titans (NYSE: ECON) is the easiest way to gain direct exposure to those favorable demographic trends. The fund spreads its assets across 29 consumer goods and services companies based in a wide range of emerging markets. This broad exposure allows investors to venture beyond the well-trodden ground of the BRIC (Brazil, Russia, India and China) nations without taking on large amounts of country-specific risk; no single country accounts for more than 20 percent of the fund’s investable assets.

The fund invests in local markets without hedging its US dollar exposure, a favorable structure so long as a major default in Europe doesn’t result in a tsunami of safe-haven buying of the greenback. The fund’s preference for local firms in defensive sectors will also help protect investors’ portfolios should the economic malaise in the West deepen.

SPDR DB International Government Inflation-Protected Bond (NYSE: WIP) offers insurance against mounting inflationary pressures and an attractive yield.

Made up of inflation-protected bonds issued by 18 global governments, the fund’s portfolio offers exposure to both developed and emerging markets. Although bonds issued by France and the UK account for more than a third of the ETF’s investable assets, much of the remainder is allocated to emerging-market issuers.

The portfolio includes ample exposure to the resource-rich nations of Brazil, South Africa, Canada, Australia and Chile—countries where inflation is widely expected to pick up. However, most of these nations have sound fiscal policies, limiting the risk of hyperinflation.

All of the fund’s holdings are denominated in local currencies. As a result, the ETF serves as an insurance policy against a falling US dollar and offers a potential tailwind when the greenback declines.

Homestay

Not every investor is comfortable overseas. For those who remain leery of investing in emerging markets, dividends will be a critical component of total return. Vanguard Dividend Growth (VDIGX) buys into dividend paying companies with clear competitive advantages. Energy, health care and consumer defensive names make up some of its largest sector bets—leaving it with a mediocre yield of 1.75 percent and a tendency to underperform in rising markets.

These attributes can be a liability in boom times, but they act as a safety blanket during periods of uncertainty. The fund’s rock-bottom 0.34 percent expense ratio makes it one of the cheapest dividend funds available.