Finally Time to Buy Europe

You’re hearing it everywhere: “Stocks are overvalued.”

Yet, if your knee-jerk reaction is to sell everything and run for the hills, that’ll be a costly mistake.

As I told my Cycle 9 Alert subscribers on Tuesday, new all-time highs don’t automatically mean stocks are overvalued. In fact, recent equity highs are actually well-supported by earnrnings growth.

What’s more, it’s only the U.S. equity markets enjoying the all-time highs.

Using a simple percentage-above-peak calculation, with 2007 highs as a reference point, here are the world’s three major markets:

U.S. (SPY): 12% above prior peak

Emerging Markets (EEM): 24% below prior peak

Europe (VGK): 30% below prior peak

So, while you’ll pay a premium for the relatively safety and strong momentum in U.S. stocks, you can find real bargains elsewhere… and right now you should look to Europe.

I shared this chart with my Cycle 9 Alert subscribers, showing how European stocks are poised to outperform emerging market stocks ahead. Take a look…

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In this chart, I pitted both European stocks (VGK, in white) and emerging market stocks (EEM, in yellow) against the S&P 500 (SPY). You can see how both regions have underperformed U.S. stocks since late 2010.

Of particular interest now is the crossover at the bottom of the chart. This shows how European stocks have rebounded with more vigor than emerging market stocks since July.

With a tailwind of investor confidence, dirt-cheap European stocks are poised to pop higher as investors look for convincing value plays.

I gave Cycle 9 Alert subscribers specific instructions on how to play this emerging trend between now and April. If you’re interested in receiving these recommendations, please click here.

If you’re happy just gaining broad exposure to European equities, consider simply buying the Vanguard MSCI Europe ETF (NYSE: VGK). Here’s a chart of this ETF, showing a convincing, bullish breakout above prior resistance around $52.50.

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From current prices, a returnrn to its 2007 peak would represent a 43% gain.

Adam O’Dell

Using his perfect blend of technical and fundamental analysis, Adam uncovers investment opportunities that return the maximum profit with minimum risk.