Trading Nation

Here comes another reason to buy European stocks

Another reason to favor Europe
Baird calls mining bottom
Put your money in Greece?

It used to be that the United States was the proverbial "cleanest dirty shirt in the pile"—that is, the economy showing the most impressive growth in a slow-growth world. All of the sudden, that no longer appears to be the case.

The first-quarter gross domestic product report for the euro zone is set to be released Wednesday, and economists expect to see year-over-year growth of 1 percent, according to FactSet. While that would ordinarily be nothing to write home about, it compares quite favorably to the initial GDP growth reading of 0.2 percent logged by the U.S. in the first quarter.

As Neil Azous of Rareview Macro pointed out in a note Monday: "For the first time in years, as measured by quarterly GDP, Europe will show a stronger growth profile than the United States."

European stocks have already had a great year; the 15.6 percent rally in the Euro Stoxx 50 smokes the 's 2.3 percent gain. But with economic data potentially supportive of further gains, it may still behoove investors to send their money on a European adventure.

"It's not too late. There's still room for appreciation," commented Erin Gibbs, equity chief investment officer with S&P Capital IQ.

She pointed out that in Europe, unlike in the U.S., serious earnings growth is expected over the next 18 months.

"And on top of that, we've got pretty attractive valuations. They're not dirt-cheap because we've had a good run-up, … but they're still cheaper than what the U.S. is trading at. And you've got so much more growth," Gibbs said Monday in an interview with CNBC's "Trading Nation."

"Definitely increase your international exposure if you can," Gibbs said.

To do so, Todd Gordon of recommends that investors jump into the iShares Germany ETF (EWG), which offers noncurrency-hedged exposure to German equities.

"So if we have a rally in the euro and the [German index] DAX, this product, EWG, should move ahead well above" current levels.

CORRECTION: This version corrected the spelling of Rareview Macro.


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