(Bloomberg) – European stocks have been behind for such a long time, and Credit Suisse Group AG and Morgan Stanley stocks are joining an increasingly bullish refrain. The investors take note of this. The Euro Stoxx 50 index from Eurozone blue chips rose 13% in 2021, outperforming the S&P 500 for the first time since 2017 and outperforming all other major regional benchmarks in the first five months of the year. This coincided with a recent surge in European equity fund inflows, while Bank of America Corp.’s latest global fund manager survey found that euro area equities are now the largest regional overweight position in equities. The scope for Europe to catch up with the US as vaccination programs pick up, ”said Catherine Doyle, strategist on BNY Mellon’s Newton Investment Management’s real return team Overweight Europe versus global equities. What is Europe? Currently, the huge presence of cheap sectors responsive to an economic recovery is so attractive that it is being accelerated by a surge in vaccination efforts that originally lagged the US and UK. The region is also less prone to inflation concerns, which have spooked markets recently. Given a relative lack of the hardest hit sectors like technology. Such factors provide a catalyst for historically low valuations. The Euro Stoxx 50 index is trading at 17.6 times 12 month earnings, compared to 21 times the S&P 500 and 26 times the Nasdaq. Unlike most global indices, it has not yet reached its record high or even surpassed its 2008 high. The recent outperformance of Europe is only just beginning to catch the attention of market participants. Credit Suisse raised continental European stocks to an overweight position on Thursday. She pointed to the region’s economic growth lagging behind the US, exposure to the green energy boom, and US investor positioning relative to other regions on earnings recovery as the Biden administration plans to reduce corporate taxes to raise. According to Chris Dyer, Director of Global Equity, the US investment management company Eaton Vance is “significantly” overweight in global and international equity portfolios in Europe. According to data from Bank of America and EPFR Global, the region continues to outperform the USEquity inflows. European equity funds have picked up inflows over the past six weeks. However, there is still a long way to go to catch up with their peers. By 2021, the region had risen to just $ 4.8 billion, compared to a whopping $ 181 billion invested in U.S. equity funds. Last year, investors pulled around $ 43 billion from European equity funds, most of them among the major regions. International investors also vote for euro area stocks by stacking in exchange-traded funds. The US-listed SPDR EURO STOXX 50 ETF will see its largest inflow month since 2017 with around USD 300 million in new additions in May, while the iShares MSCI Eurozone ETF recorded its largest one-day inflow of USD 187 million since October 2019 this week. However, the strategists surveyed by Bloomberg see only limited opportunities for profits compared to the current level until the end of 2021. The average forecast for the Euro Stoxx 50 is 4,012, a decrease of 0.3% from the close of trading on Friday. This type of market might favor stock pickers over index followers. Newton’s Doyle likes automakers like Volkswagen AG that may benefit from the electric vehicle rollout, energy companies like RWE AG that are pushing for a move to green energy, and low-cost airline Ryanair Holdings Plc, which it expects to see as the journey goes up increasing passenger numbers. Volkswagen is down 12% from its peak in April and has increased by 42% since the beginning of the year, while RWE has fallen by 5.6% and Ryanair by 0.2% this year. ‘Final Unlocking’Luke Newman, who runs long-short funds at Janus Henderson, investors say he has net long stocks from the euro area and net short positions in the US market because Europe is only now in the “final.” Activation ”occurs. READ: More than 1.54 billion shots fired: Covid-19 Vaccine Tracker “Within the unlocking trade, continental Europe has lagged behind the US and UK with waves of infection and the introduction of vaccines,” Newman said in a video interview. “We believe the time has come when the market is ready to look not necessarily to this year but to 2022 and 2023 and begin a rebound for the deprived areas of the market.” He sees Safran SA, a French aircraft engine manufacturer that grew just 3.4% this year, and Sodexo SA, a French food services and facility management company that grew 13% in 2021 but increased 10% from March has declined, as some of the companies This may benefit from the recovery. Kevin Thozet, member of Carmignac’s investment committee, says the European market is in a “sweet spot” due to its balance of cyclical and high-quality names such as luxury companies, which make up a large proportion of the index. The French asset manager, with assets under management of 39 billion euros, holds shares that include Safran and Ryanair as well as LVMH, Hermes International and Ferrari NV. “The big attraction in the US has long been the technology sector. There are tech companies in Europe, but they’re not that important. This has not helped European stocks in the past, but there is currently a rotation and Europe is benefiting, ”Thozet said in an interview. Tax and monetary incentives and a recovery in consumer spending should enable economic activity in the euro, according to Wei Li, global chief investment strategist at the BlackRock Investment Institute, the area is expected to return to pre-Covid levels by the end of 2021. BlackRock raised euro area stocks to neutral in February, favoring them over the European credit market. “In addition to a more positive macro backdrop, we see the euro area valuations as supportive,” she said via email. “We still expect a quick restart of activities in the second half of this year.” For more articles like this, visit bloomberg.com. Sign up now to stay up to date with the most trusted business news source. © 2021 Bloomberg L.P.