A typical allocation would be something like 35% in stocks, 55% in bonds and 10% in commodities. In countries like the US or other developed economies, this can work nicely because when stocks fall off a cliff, usually bonds rise, this provides a drawdown cushion to the investor and protects his downside But in emerging markets its different. I speak from experience. When shit hits the fan usually, stocks, government bonds AND the local currency will fall off a cliff. That's what happened in Brazil over the last few years This means that government bonds do not provide that downside protection (also, even if they did, because the currency is collapsing, you are becoming poorer globally). So it looks to me that for investors in emerging markets (or from developed markets that are worried about their country's future) they need to own income earning assets outside their countries in a much bigger allocation in order to hedge themselves. Instead of just 10% or so in foreign stocks (in that 35% bucket allocation), they probably need foreign goverment bonds (and consequently, foreign FX) as well And the broker probably should be located outside that emerging market for further judicial/confiscation protection
Of course, there are some further distinctions between emerging markets such as EMs in a currency peg (China), EMs with independent monetary policy (Brazil), dollarized EMs (Panama, Ecuador), etc. But I think my point is that if people in countries like that follow the risk parity theory without adjusting for the extra risks, they might just find out very painfuly it doesn't work nearly as well there
Stay with U.S. markets as they have an advantage or edge in that the underlying long term trend reflects solid stable policy, product innovation and development, persistence of credit cycle through monetary easing, incentives towards rewarding shareholders, liquidity, etc. Mohamed El-Erian has stated a premise that the U.S.economy is at a crossroads and that until "fiscal" and structural policy decisions are made regarding the economy ( link here for interview ), hence, as there is an enormous amount of intervention by central banks, it changes the correlation between different asset classes, as happened in 2008. James Director of Quantitative Research