Europe stocks: Foot on brake or full steam ahead?

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European stock markets are at a tipping point, after outperforming their American cousins with bumper returns at the start of the year.

Now, analysts and fund managers are split on how to position for a couple of months that could be prove to be very volatile.

The pan-European Euro Stoxx 600 Index rallied 21 percent to mid-April from the start of the year, but has since reversed 4.5 percent, as a bond market selloff has spread to equity markets.

"I'm not really keen on the volatility," Lothar Mentel, an analyst from Tatton Investment Management, told CNBC Wednesday. "A lot of our clients haven't got that capacity for risk to really take on the equity market."

Mentel took some money off the table three weeks ago and told CNBC that he wasn't planning to reenter the equity space in the short-term because of the "disconcerting" feeling coming from the fixed income markets. However, he added that the longer-term growth case for equities was "still very much there."

Rising yields

Illiquidity to drive volatility: Pro

Rising yields on German Bunds and other major sovereign bonds has roiled markets in recent weeks. The price - which have an inverse relationship to the yield - of such bonds has seen sharp intraday drops, leading to similar falls in equity indexes like the German DAX.

This is due to a dent in overall investor sentiment, according to analysts, and has hit sensitive growth stocks in Europe because of the impact on borrowing costs and thus future earning potential.

Some fund managers have opted for more nuanced strategies than simply skirting the equity space.

Read MoreHow the Treasury selloff could turn'chaotic'

Speaking at a presentation in London on Thursday, Rob Jones, a co-head of European equities at Switzerland's Union Bancaire Privée (UBP), said he would likely steer clear of export-focused firms during the summer months.

He added that the benefit of the weak euro had already "fully played out," but said he expected a very strong finish to 2015, with earnings growth kicking in.

Greek 'tragedy' vs 'booming' Ireland

Bonds: Expect more extreme moves

Rupert Welchman, a fund manager and colleague of Jones' at UBP, compared the virtues of different European nations from a stock market perspective.

Structural reforms in Spain and Italy had left him impressed and he predicted the Spanish economy would grow by a healthy 3 percent in 2015.

He added that Ireland was "now booming" and quipped that lawnmower advertisements had just returned to the country's media—suggesting a pickup in discretionary spending.

Read MoreEurope's upbeat earnings are not just down to euro

However, he called Greece "a tragedy" and was left feeling "pretty scared" after meeting with the ruling far-left Syriza Party, which gained power earlier this year.

"You have been left with a bunch of academics (that govern) through theory rather diplomacy and politics....that's very dangerous," Welchman said on Thursday.

Nonetheless, he was bullish on Greek stocks like Titan Cement, the Hellenic Telecommunications Organization and Alpha Bank, suggesting the latter could even survive a return to the Greek drachma if the country exited the euro zone.

Despite the adage "sell in May and go away," some investors remained hopeful.

Sheila Patel, CEO of International Goldman Sachs Asset Management, told CNBC on Thursday that she was seeing "consistent interest" in European equity markets, aided by the dollar's strength.

"I think there's still a lot of caution about Europe but I certainly think from an impact perspective I would watch European equities. Even though we've seen inflows there could be more," she said.