The U.S. stock market offers the opportunity for much better returns than bonds, but equities in Europe may see even bigger upside, said three mutual fund chiefs who oversee more than $1.2 trillion of client assets.
"The [American] equity market looks to me more attractive relative to other places to invest if you look at yields in money markets … [and] fixed-income … over the next three to five years," Brian Hogan, division president for Fidelity Equity and High Income, said Tuesday.
"[But] there are pockets of strength internationally," said Hogan, who manages over $900 billion. "I'm constructive on Europe ... [and] Japan. I think there's real reforms taking place there under Prime Minister [Shinzo Abe]. It's going to take time. But he's addressing the right issues there."
Appearing on CNBC's "Squawk Box" with Hogan, Oppenheimer Funds CEO Art Steinmetz and Putnam Investments CEO Bob Reynolds said they also like stocks in Europe.
"There are more bargains overseas," Steinmetz said, calling Europe "comparatively cheaper" than the U.S. market. "But I won't call the U.S. overvalued. We're not in a bubble."
"If you look at the U.S. stock market," Steinmetz continued, "it's priced very attractively compared to Treasury bills, which yield zero." He has $200 billion under management.
Said Reynolds, who manages $150 billion: "What you're looking for around the globe is improvement. We're seeing that in Europe and other parts."
Like Steinmetz and Hogan, Reynolds is also positive on the United States. "The U.S. consumer is at the strongest point it's been in years," he said, crediting in part low interest rates and the decline in oil prices.
But Reynolds said he sees oil prices starting to bottom. "It's flattening out here and probably a good time to buy."
Battered oil prices were higher early Tuesday, around $46 a barrel, after falling nearly 3 percent in New York trading on Monday. U.S. crude rallied near $50 two weeks ago. But since June 2014, prices have been cut in half.
Steinmetz also believes the oil rout may have run its course. "At $40 a barrel, you've reached some kind of a floor. We keep bumping up against that."
"Tesla is going to mean that gasoline becomes obsolete, but not today," he said. "There is going to be the need for a lot of gas for a long time to come."
"We find that the supply-demand is roughly in balance now," Steinmetz said. He said demand could increase if global economic growth picks up. "I want to have more energy than I used to in my portfolio that's for sure."
As for the recently strong dollar, Fidelity's Hogan said, "We're in the later innings of strength in the dollar." Multinational companies that have had their earnings hurt by the dollar may soon start to get some relief, he added.
In the past 1½ years, the dollar index against a basket of foreign currencies has gained nearly 20 percent.