Most forecasters—myself included—believed that the US Federal Reserve wouldn’t make a move to taper off its quantitative easing program until sometime next year, with surveys conducted by Bloomberg and other groups generally showing that less than a third of those asked believed the Fed would act after yesterday’s meeting.

However, the Fed certainly did act, announcing yesterday that it would reduce its monthly bond purchases by $10 billion beginning in January.

Thankfully though, I was also wrong about the market’s reaction to the announcement. True, easing off the throttle by just $10 billion was about the least the Fed could do, particularly since it also said it would continue holding interest rates down. But considering the flight from risk we saw in May when Bernanke just hinted at easing, I figured we would get a correction if not a crash on the news.

The market’s reaction was quite sanguine to yesterday’s announcement to say the least, with the both the S&P 500 and the Dow both closing at record highs again. Even the iShares MSCI Emerging Markets Index (NYSE: EEM) managed to finish the session 1.3 percent higher on the day.

Asian traders have also been buoyed in their overnight trading, pushing most Asian indexes higher with the notable exceptions of Hong Kong, China and India.

India being down is no surprise; while it took steps to stabilize the rupee and narrowed its current account deficit this summer, growth is slow and inflation has been on the rise. Given the Indian economy’s weakened state, it’s likely that it will experience capital outflows as that money flows back to the US and there’s more volatility in the rupee.

Similar concerns are weighing on China and Hong Kong, with interest rates in Hong Kong likely to rise ahead of any move by the Fed and increase funding costs there. That, of course, is likely to hurt growth.

European stocks have also reacted favorably to the news, if for no other reason than the clarity it provided.

However, the taper will cause problems for some emerging market countries. As I’ve said, India will have a tough time weathering the shift in US monetary policy, but I also look for problems in Brazil as well.

Brazil is continuing to struggle with inflation, which is currently running at 5.6 percent, even after the central bank there has raised its benchmark interest rate and the government has taken steps to cap the prices of some consumer goods and services.

The Brazilian government is also running a large budget deficit, coming in at BRL11.5 billion (USD5 billion) and well above forecasts. President Dilma Rousseff’s attempts to restart the country’s growth through tax cuts and higher spending are making it difficult for the country to hit its fiscal targets.

Given Brazil’s difficulties, Fed tapering is likely to result in a weaker Brazilian currency, which will further push up inflation, prompting higher interest rates. With elections coming up next year, it seems unlikely that the government will take any meaningful steps to address the underlying problems, opting instead for more populist measures. Considering that Standard & Poor’s already put the country’s credit rating on a negative outlook in June, a downgrade seems likely.

India isn’t in quite such dire straits, having already taken action to address some of its problems. Raghuram Rajan, the new governor of the Reserve Bank of India, has increased the country’s benchmark interest rate twice since taking over in September, without apparently hampering growth as yet. He’s also placed restrictions on gold imports and managed to attract a strong flow of remittances and savings from Indian expatriates around the world.

Thanks to those moves, India’s current account deficit narrowed substantially in the third quarter and it wasn’t caught entirely flatfooted by the taper announcement, but capital outflows are still likely.

Overall, though, I think most other emerging market countries should do relatively well in 2014, helped by America’s return to growth. A stronger US economy generally presages well for the emerging world and, for now, tapering isn’t tightening.

So while the slowing Fed stimulus will intensify the battle for capital around the world, the stronger, growing economies of the emerging markets will continue to fare well under the new monetary regime.

I don’t expect any serious problems for China and while higher volatility in the won will be at least a short-term challenge for South Korea, neither country faces serious difficulties. The markets in both Singapore and Taiwan will also stand up well, given their trade links to the US.

South America will be much more of a mixed bag, though Brazil and Argentina are the most at-risk countries. Mexico on the other hand will do well, thanks to strong, pro-business reform measures taken by the government over the past year and the Mexican economy’s close ties to America.

Portfolio Roundup

In yesterday’s issue of Global Investment Strategist, I sold Indian financial company HDFC Bank (NYSE: HDB). While it has posted solid earnings and loan growth recently, I believe the weakened state of the Indian economy will likely result in higher default rates in coming quarters and pressure the bank’s results. The Fed’s taper decision will only continue to add pressure to the problems, resulting in higher funding costs.

I’m reiterating my sell recommendation on HDFC Bank, for a hefty return of 65 percent.