With a bout of volatility in the US stock market, some investors are looking to European stocks because of low valuations and the ebb of the epidemic in the region.

The euro zone blue chip index Stoxx 50 is up 13% so far this year, outperforming the S & P 500 in the first five months of the year for the first time since 2017. The STOXX 600index is up 10.7% so far this year, roughly the same as the s & p 500index.

European equity funds posted their longest consecutive net inflows in more than three years, according to EPFR, while global fund managers surveyed by BofA Global Research said they had increased their holdings in European equities more than at any time since March 2018. Meanwhile, Morgan StanleyNinety-five percent of strategists listed holding European stocks as one of their main trades.

Brent Schutte, chief investment strategist at Northwest Mutual Wealth Management, said: "We have increased our exposure to the United States in the past few years, and now we are becoming more and more interested in foreign stocks."

As Europe's economic recovery begins to take root and US growth is expected to peak soon, investors see this as an opportunity. As the global economy rebounds, financial and industrial stocks will also account for a larger share of the European stock index.

"vaccination is increasing and restrictions are likely to be lifted, which should mean a good economic recovery and spread to eurozone markets."

After contracting in the first quarter, eurozone GDP is expected to grow in the second quarter and the fastest in the third quarter, at an annualised rate of 9.2 per cent, according to the Oxford Institute of Economics. Meanwhile, US GDP is expected to peak at 13.3 per cent in the second quarter after GDP growth in the first quarter.

Mona Mahajan, senior US investment strategist at Allianz Global Investment, said. "the story in the first few months of this year has revolved around US exceptionalism, which is likely to abate over the next three to six months, especially if Europe continues to catch up."

Many European stocks also trade at a discount to American stocks. According to Refinitiv Datastream, the S & P 500 trades at nearly 21 times forward earnings, while the Stoxx trades at 16.7 times forward earnings-a gap higher than the average over the past decade, although it has narrowed recently. Part of the reason for the gap is that US stock indices prefer technology stocks with higher valuations and other growth stocks. These stocks have been driving US stocks higher since the financial crisis a decade ago and pushed the S & P 500 ahead of Europe, but they could fall out of favour as bond yields rise and inflation fears lower their valuations.

There are several factors that could complicate the decision to buy European stocks. With the appleAnd AmazonAs technology and Internet giants continue to make strong profits, investors may be reluctant to cut back on deals that have been running for years.

Inflation in the eurozone has also received some concern as inflation concerns have hit US stocks in recent weeks. Inflation in the euro zone is now close to 2%, the highest level in years.

Investors say any setback in Europe's response to the epidemic and an economic rebound could also weaken stock markets there. The reversal of the recent weakening of the dollar could have the same effect, hurting US investors seeking to convert profits from euro-denominated assets into local currencies. The dollar has fallen about 4 per cent against the euro since early April.