Despite the sharp spring selloff in the S&P 500, the index is once again near its highs for the year, with a year-to-date gain of almost 12 percent. Interestingly, that performance still isn’t enough for the index to rank among the top 10 performers this year.

Although Egypt suffers from shockingly high unemployment, high-profile kidnappings of tourists, and tumultuous elections, its stock market has outperformed its global peers, as reflected by Market Vectors Egypt ETF’s (NYSE: EGPT) year-to-date gain of 54 percent.

The fact that the US has remained a steady ally of the country has been a significant driver of those gains.

American lawmakers were initially leery of Egypt’s recently elected President Mohamed Morsi and his Muslim Brotherhood party. Because the Muslim Brotherhood is known to harbor a hard-line Islamist faction, many worried that the political group’s rise to power would simply replace Egypt’s former secular dictatorship with a theocracy. For now, those concerns have proved wildly overblown.

The Brotherhood has made it clear that its top priority is to stabilize the country’s still-fragile economy. Toward that end, it’s taken steps to liberalize Egypt’s labor market and encourage stronger economic ties with other countries. President Morsi has also been a strong critic of Syria’s authoritarian regime and has called on Iran to abide by United Nations resolutions limiting its nuclear program.

Morsi has also allayed Western fears about the future of Egyptian-Israeli relations with his apparent willingness to honor his nation’s treaty commitments. Given Egypt’s central role in maintaining a relatively peaceful coexistence between Israel and its neighbors over the past couple decades, any interruption in that status quo could have devastating consequences for the region.

Since Morsi has been a partner for Western interests, the Obama administration is working on an agreement to either forgive about $1 billion of Egyptian debt to the US outright or to allow the country to invest its debt payments in developing its internal infrastructure. The US is also supporting Egypt’s request for an almost $5 billion loan from the International Monetary Fund.

Additionally, the US government is offering about $375 million in financial support as an incentive for American companies to start doing business in the country. As part of this effort, the US recently sent a high-level trade delegation to Egypt that included executives from some of the largest US corporations.

In addition to courting the US, Morsi is also wooing the Chinese. His first official trip as head of state was to Beijing, and China is expected to invest about $3 billion into Egypt over the next two years. Most of that money is expected to be earmarked for infrastructure and tourism. That sum marks an enormous jump from the $100 million China spent there over the past five years or so.

While there are still a number of potential risks at play in Egypt–its political situation could destabilize or its high unemployment and erratic inflation could spark more unrest–the country seems poised to become an economic powerhouse in the region. And its favorable demographic profile and sustained investment in education and infrastructure could make Egypt an excellent base for businesses looking to develop a growing presence in the region.

Although an Egyptian-themed investment is still a highly volatile and extremely risky play, Egypt could offer one of the best investment opportunities in the emerging markets.

What’s New

Last week, First Trust Advisors launched First Trust CBOE S&P 500 VIX Tail Hedge ETF (NYSE: VIXH), a fund that offers exposure to the S&P 500 while attempting to hedge against dramatic swings in volatility.

The fund primarily invests in S&P 500 stocks. As market conditions warrant, managers will add one-month call options on the VIX Index, which tracks the implied volatility in S&P 500 options. That strategy is essentially an attempt to benefit from either gains in stock prices or an uptick in market volatility.

While there are numerous exchange-traded funds that attempt to mitigate the market’s risk, this is the first to marry index holdings with positions in VIX options. Most other funds choose to dynamically allocate between stock index positions and cash or to rotate among low-volatility index components.

First Trust CBOE S&P 500 VIX Tail Hedge ETF carries a 0.60 percent annual expense ratio.