THE SNEEZE THAT IS the meltdown in the credit, housing and financial markets in the U.S. has become a nasty cold for the rest of the developed world. If there's some solace to be found it's that as bad as domestic equity returns have been so far this year, most countries have fared much, much worse.

That's small comfort for investors who followed the well-worn advice to allocate substantial parts of their portfolios to foreign stocks. Of the 26 countries tracked by the S&P/Citigroup BMI World index, comprised of equities in developed markets, not a single nation has posted a positive total return in 2008. (See chart below.) Emerging markets have fared better but are still down year to date.

helped in no small part by the resilience of steel giant Arcelor Mittal) and Switzerland (thanks mightily to its currency) have fared better than the U.S. Even Canada, which was riding the materials and energy boom, is off nearly 11% this year.

The global economy may have long remained resilient despite U.S. weakness, but the data show that that meant little for equity returns. That makes Thursday's report from the European Union's statistics agency even more troubling: Gross domestic product declined in the 15-nation euro zone for the first time since the early 1990s.

Share prices are supposed to be a leading indicator. Perhaps equities in the euro zone presciently discounted that latest bit of bad news. But we wouldn't bet on a bottom just yet. True, foreign allocation remains an important part of a well-diversified portfolio, but the data show that plunging heedlessly into overseas equities even in developed markets is fraught with danger.

The World Is Flat
Country	Year-to-Date Total Return (%)*
Luxembourg	-4.68
Switzerland	-9.12
United States	-10.81
Canada	-10.81
Denmark	-12.04
Japan	-12.81
Sweden	-14.86
Netherlands	-15.17
Singapore	-16.42
France	-17.70
Norway	-18.29
United Kingdom	-18.58
Austria	-18.67
Germany	-18.95
Spain	-19.15
Australia	-21.53
Italy	-21.97
South Korea	-23.79
Hong Kong	-25.09
Finland	-25.43
Belgium	-26.23
New Zealand	-27.00
Greece	-29.40
Portugal	-32.34
Ireland	-34.62
Iceland	-47.74

* As of Aug. 13 in U.S. dollars

Source: S&P

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