This may be an opportune time to jump into European stocks, experts say.
Many experts are hailing 2013 as the start of "the great rotation," in which investors move money from bond to stocks as bond yields start rising, ending the long bull market for bonds.
And European stocks may be the best deal. Investors generally saw a dim outlook for Europe until the European Central Bank stated it would do "whatever it takes" to preserve the eurozone last year and Greek voters affirmed their support for budget-cutting austerity measures.
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However, with the ongoing U.S. debt ceiling crisis and stabilization of the eurozone's debt crisis, many investors may see Europe as a safer bet.
Trading at a 25 percent discount to U.S. stocks, European stocks are cheap, according to BlackRock data cited by CNBC. European stocks remain about 15 percent below their historic long-term average on price-to-earnings basis.
BlackRock experts predict a 15 percent return on European stocks in 2013, including a 9 percent earnings yield and a dividend yield of 4 percent.
"We are only mid-way through a bull market," stated BlackRock analyst Nigel Bolton in the firm's Barometer for 2013 report.
BlackRock has seen a substantial increase of money flowing into European stocks.
"These flows initially came from cash and U.S. equities, but also more recently from some investors switching out of bonds," Bolton wrote, according to CNBC. "The latter is very significant as it is the first time we have seen this for many years."
The economic outlook for Central and Eastern Europe is also much improved, according to the European Bank for Reconstruction and Development.
"Downside risks to the outlook have continued to recede as the likelihood of further deterioration of the eurozone crisis diminishes,” the regional lender states in its latest economic outlook.
The bank expects a 3.1 percent regional growth rate in 2013.
“For the first time in a long while we are now seeing the possibility of a reduction in the risks facing emerging Europe, especially the risks from the eurozone," said Erik Berglof, the bank's chief economist. "It is too early to sound the all-clear but there are signs of stabilization.”
Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.
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