Talking Numbers

This is the best performing market in the world right now

Talking Numbers

This is the best performing market in the world right now

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This is the best performing market in the world right now

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This sector could be the best bet this year

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This sector could be the best bet this year

The U.S. stock market may be at record highs but, it's nowhere near the best performing market in the world.

Although the investors in the U.S. benchmark S&P 500 index have seen a return of a little more than 4 percent year-to-date, the Dubai Financial Market General Index has made over 56 percent since the start of 2014. In the past 12 months, Dubai's index has returned more than 117 percent.

"Dubai is really a microcosm of what we see not just in the frontier markets but in the global economy," said Richard Ross, global technical strategist at Auerbach Grayson. Included in that was a nasty downturn after the global financial crisis.

(Read: Patchy outlook for frontier stock index as top scorers exit)

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"This market was really the poster child for financial and housing excess," said Ross about Dubai during the last decade. "Of course, that [didn't] end well. We [lost] 75 percent of our value as the S&P 500 got cut in half. Keep in mind, developed markets can be fairly volatile, too."

And, it's not just Dubai. Many "frontier markets" are trouncing more established emerging markets, not to mention developed markets.  Since the start of this year, the iShares MSCI FM 100 ETF (FM) is up more than 16 percent while the iShares MSCI Emerging Markets ETF (EEM) has gained 2 percent.  But, the FM doesn't tell the whole frontier market story.

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"It is important to know what you own," said Gina Sanchez, founder of Chantico Global. The FM is geographically tilted toward oil-exporting countries. Kuwait, Qatar, the United Arab Emirates, and Nigeria comprise 68.3 percent of the ETF's holdings by geography. But the FM is not necessarily all about oil since 58 percent of its market value comes from the financial sector.

(Read: Upgraded! The Arab nations joining the BRICs)

"Financials are a big piece of this story," said Sanchez, a CNBC contributor. "A lot of this has just simply been the building of infrastructure and the ability to give loans where you couldn't give loans before. These are growing markets and so they can be very interesting plays, especially as you see continued low rates in developed economies. "

Although individual frontier markets may be volatile, putting them into a basket can offset much of that risk, notes Ross, a "Talking Numbers" contributor.

"When you put them in [together], it actually reduces the overall volatility of the portfolio and really allows you to capture some of the upside like we've seen in that chart of Dubai while at the same time muting some of your portfolio risk," said Ross.

"Take advantage of the growth of these economies," Ross added. "In 2050, Nigeria will be bigger than the U.S. Keep that in mind."

To see the full discussion on the iShares MSCI FM 100 ETF (FM), with Sanchez on the fundamentals and Ross on the technicals, watch the above video.

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