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More Bullishness from Fed Vet Gramley

Bullish headlines, continued. Capacity utilization at 2-yr high (but still below the 30-year average), industrial production posting its biggest gain since July, the Empire Manufacturing Survey far stronger than expected.

Former Fed Governor Lyle Gramley said GDP will rise by more than 3 percent this quarter and will grow at that pace or better in 2011, joining JP Morgan, Morgan Stanley and Pimco in the improved outlook category.

Will the U.S. finally outperform in 2011? A more interesting question is whether 2011 will finally be the year when the U.S. beats emerging market stocks. This is of more than academic interest, since HUGE AMOUNTS OF CASH HAVE GONE INTO EMERGING MARKET FUNDS THIS YEAR.

Richard Bernstein, formerly with Merrill but now running his own shop, is one of several strategists who think the U.S. will outperform. One reason: valuation. "Emerging markets are now leading the world in negative earnings surprises and remain very expensive," he said in a note this morning.

And has anyone noticed...emerging markets didn't outperform this year? The S&P 500 is up 11.5 percent in 2011; the iShares MSCI Emerging Markets Index, up 12.6 percent. Not much of an outperformance.

Still, what a tear. So far, the EEM has outperformed the S&P 500 seven of the last eight years (it went public in April, 2003). The exception: 2008, when the S&P dropped 38 percent, and the EEM dropped 50 percent.

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