We’re in the midst of a chauvinist’s rally in U.S. equities. Our country ’tis of greatness. The rest of the globe…? Well, it’s in trouble.

Evidence? Here in the U.S., the economy is picking up. Corporate sales and profits continue to improve. Inflation has remained muted. Investors have begun to commit capital to equities. Our biggest overhang might be too much bullishness.

Outside our borders, there’s political unrest. Governments are being toppled. Food inflation is an expanding problem. Investors are scaring out of risky assets in favor of safer harbors.
If it seems a little trite to define the world in these “We’re okay, you’re not” contrasts…well, it is. Problems? We’ve got them, starting with the labor situation. Emerging markets’ economic growth, meanwhile, mostly dwarfs ours.

But if you look at how equities have performed lately, there’s an argument to be made that, early in 2011, there’s been some kind of global disconnect going on. The S&P 500 is up nearly 6% this year. The MSCI Emerging Market ETF, which outdistanced U.S. equities last year, is down nearly 4% for 2011.

“Inflation has been a primary story in emerging markets this year,” says Alec Young, equity strategist at Standard & Poor’s. “In the U.S., it’s been about improving fundamentals. Our markets are reacting the right way.”

For the week, the S&P 500 added 18 to close at 1329, its highest since June 2008. The Nasdaq Composite increased 1.5%, to close within two percentage points of a nearly four-year high. The latter came despite the poor outlook from Cisco Systems (CSCO); shares of the tech bellwether surrendered 15% in the wake of its earnings statement.

For the most part, though, earnings have been strong, and of a better character than in preceding quarters, when companies were topping estimates, sure, but largely by savagely hacking away at costs. Now, earnings are up, but sales are, too. Some 70% of companies that reported fourth-quarter results beat their revenue targets, and with lean cost structures in place, margins have swelled to high single-digits.

“Estimates for revenue growth have been going up quite a bit,” says Nicholas Colas, ConvergEx Group’s chief market strategist. Where analysts had been forecasting something on the order of 6% growth, it’s now 7% or 8%.

That’s allowed stocks to continue to rise—80% of the S&P 500 is trading above its 50-day moving average, an important technical indicator—despite rising raw-material costs.

Commodity prices continue to climb. Corn hit a 31-month high at more than $7 a bushel in the futures market. In releasing earnings, Kraft (KFT) bemoaned costs.

Still, “the economy, as a whole, is okay,” Colas says, though he worried that, at some point soon, cyclical factors are going to have to overtake government stimulus programs such as the legendary QE2.

One reading showed consumer credit—crucial to organic economic expansion—rose last month, the third consecutive positive reading. There haven’t been three months of expansion in that since July 2008. Small-business confidence rose to its highest level in three years. The character of the market, admittedly, has seemed a little suspect. Volume has dwindled. The number of stocks posting new highs isn’t as large as earlier in the recovery.

“Sometimes you’ll see the market in this kind of sideways consolidation,” Young says. “But the key thing is that the uptrend is being maintained.”

That’s especially good news in the face of the unrest in Egypt prior to and following the resignation of Hosni Mubarak—the kind of geopolitical event that could have, prospectively, created some turmoil in global capital markets. If anything, investors probably have a right to be nervous about the relentless “What, Me worry?” nature of the market.

“This doesn’t feel like a tipping point,” Colas says. “Because it’s predicated on better fundamentals, as well as easy money…As much as it feels like we’ve had a run, I don’t see anything imminent that takes us off the rails.” (Source: Barrons Online).