While hedge funds have become bullish on Europe, a closer look reveals that the risks are still real, Gemma Godfrey of Brooks Macdonald Asset Management said Monday.
A new Credit Suisse survey highlighted a dramatic increase in the demand for strategies focused in Europe.
"But if you actually dig a little bit deeper, it doesn't say that this is a sign there is confidence that the crisis is over," Godfrey said on CNBC's "Fast Money."
Three factors, she added, showed the other side of the bullish sentiment.
- Investors were heavily underweight in Europe through 2012.
- Fund flows focused on long/short managers.
- The survey's limited scope – citing data through mid-January – did not take into account Italy's political situation.
Godfrey said that technical indicators showed the stock market was not yet overbought, adding that a pullback would be "healthy and needed," as well as "muted."
"Retail investors are still focused on risk-averse, income-orientated investments, so it shows that there's still more to go for us to gain full conviction, but longer-term it is the place to be," she added.
Trader disclosure: On March 11, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Stephen Weiss is long BAC; Stephen Weiss is long C; Stephen Weiss is long OI; Joe Terranova is long VRTS; Joe Terranova is long SJM; Joe Terranova is long MJN; Joe Terranova is long AXP; Joe Terranova is long GPS; Joe Terranova is long KORS; Joe Terranova is long SWN; Joe Terranova is long GS; Simon Baker is long AAPL; Simon Baker is long WFC; Simon Baker is long FB; Simon Baker is long GOOG.