U.S. tech stocks have been boosted by a rally in names such as Apple (AAPL), and now have a combined market capitalization of $2.53 trillion, while the euro zone has been battered by speculation about the future of its currency, and its entire equity market is now worth around $2.503 trillion, strategists at Bank of America Merrill Lynch (BoAML) pointed out in a recent note to clients.
"Even if you have relative underweights on Europe, it doesn't change the fact that there are great companies there. We're looking for larger companies that have access to funding and they have outperformed the smaller companies - the opposite of what's happening in the U.S," Daniel Morris, global strategist at JPMorgan Asset Management, told CNBC.
European telecommunications and utilities companies are currently "very oversold," BoAML argued (read more: Where's The Upside in Europe?).
The euro zone's bedraggled banks, with a combined market value of $432 billion, are now worth less than Australia's, which have been buoyed by Asian investment to a market value of $433 billion.
After several tough years for the financial sector with bank nationalizations, and a new crop of scandals brewing, the euro zone financial sector is very cheap relative to the past decade, according to BoAML. European financial stocks are down around 80 percent from their all-time highs and trade at just half their book value. On the other hand, euro zone equities as a whole are down 56 percent from their all-time highs.
"We know that European equities should be trading at a discount, but by our calculations the relative discount has only been this high three times in the past century. We've got a systemic crisis, but we had two world wars," Richard Cookson, global chief economist at Citi Private Bank, told CNBC.
Euro zone equities will remain low until there is more clarity on the future of the single currency region, Morris argued (read more: Pimco's Gross: Stay Away From Europe)
"It's going to come down to whether Greece exits and there's a bailout program for Spain and Italy. Until there's greater confidence in the cohesion of the euro zone, you can't be certain that you'll see a return on your equity assets," he said (click here for more on a possible Greek exit).
Morris is more positive on U.S. equities than he is on European stocks.
"Now we realize that the euro zone can break up, we have to get back to the position where we believe it can't or won't. You've got to have modest expectations for developed countries as a whole, but U.S. companies have more opportunity to increase [earnings per share] than Europe."
In contrast, Cookson believes investors are already "paying through the nose" for U.S. equities.
"We're coming into a cyclical slowdown and profits are going to be a function of that. Profits in the U.S. have been on a tear and are starting to come down a bit," he argued.
Written by Catherine Boyle, CNBC. Twitter: @catboyle01
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