U.S. stocks are outperforming emerging market stocks. They have outperformed in 2011 and have done so since early 2010.

This is very counterintuitive because the performance of the equities market is predominately driven by two macro factors: economic growth and inflation.

U.S. economic growth has been much slower than emerging market economic growth. U.S. inflation is among the lowest in the world (even less than Europe's).

One would therefore expect the U.S. stock market to be one of the worst-performing in the world.

Below are charts (from Google), of three different times frames, comparing the performance of the Dow Jones Industrial Average versus Hong Kong's Hang Seng Index and the MSCI EAFE (Europe, Australasia, and Far East) Index Fund ETF, which tracks the performance of major non-U.S. equity indices.

The first chart shows the outperformance of U.S. equities in 2011. The second chart shows that the Hang Seng Index, and the MSCI EAFE to a lesser extent, essentially missed the 2010 QE2 rally.

There are some reasonable explanations for this.

Monetary inflation in the U.S. funneled into the U.S. stock market. Meanwhile, monetary inflation in countries like China were more reflected in the properties market.

Emerging market countries have also had to tightened monetary policy recently in response to inflation, which dampens economic growth.

Moreover, the decline in emerging market assets in recent months reflected a flight-to-quality trade.

Perhaps most importantly, however, emerging market stocks were extremely overvalued and still have not deflated.

The third chart shows that the Hang Seng Index was likely overvalued 2007 and again in 2009 and 2010. It began deflating in 2011. That process, however, may be far from over.

Many experts believe that in the very long term, investors clearly need to be in high growth countries like China.

In the short-term, however, it may be a foolish idea to jump in.

Emerging market equities have underperformed partly because they overperformed before, international investor Jim Rogers told IBTimes.

Rogers said these emerging market stocks will be attractive buys again after they have had their final collapses.

For the relatively poor performance of the Brazilian and Indian stock market, he also blamed their bad policies and huge debt problems, respectively.

HANG SENG INDEX China Jim Rogers Dow jones