Admittedly, it looks difficult to find growth stocks with attractive valuations in absolute terms. However, the picture looks very different in relative terms. The forward 12-month PE of our International Growth portfolio works out at 18.4x vs. 19x for our Emerging Growth portfolio and 14x for our Value portfolio. But despite the still significant gap, the increase in multiples has mainly concerned Value themes, and this trend has continued since the start of 2014. Therefore the conclusion is more qualified and the valuation of growth stocks no longer looks so prohibitive

For proof of this, one has only to examine the change in the premium (in terms of PE and P/B) of Growth stocks vs. Value stocks After reaching an all-time high in July 2013 (around 50%), this premium has fallen below its 10-year average and now stands at around 33% (a level that had not been seen since April 2011.)

While stopping short of a de-rating, the market has thus nonetheless penalised the stocks of growth groups with broad international exposure, owing to the risks hanging over emerging countries. This return of the growth premium below its long-term average offers a tactical opportunity that should be exploited, at a time when a gamble on a clear improvement in the European macro picture, and hence EPS, looks undermined by the Q1 GDP growth numbers. Therefore, we do not believe in a continuation of the relative erosion for growth sectors. In a climate of emerging country exchange rate stabilisation, the latter should recover all or part of their privileged status thanks to clearer visibility on their earnings growth.

Investment opportunities could thus be sought in Growth sectors offering broad exposure to the international cycle (emerging countries and US). Amongst sectors incarnating these trends, Food/Beverages and Consumer goods (Luxury, Tobacco, Cosmetics) and industrials stand out as having substantially corrected the valuation premium built up over the last two years. Since the last highs (2012), their premium to Value themes has contracted by 24% for Consumer goods, 20% for Food/Beverages and 15% for industrials.

Eoin Treacy's view

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The Europe STOXX 600 Index is trading on an historic P/E of 21.97 and Euro Stoxx Index has an historic P/E of 25.61. While the estimated P/E for a number of their major constituents is probably lower, these are not cheap levels. As a result investors are understandably eager to capture both relative and absolute value but following a sustained period of outperformance in equities this is an increasingly difficult task.

The Europe STOXX 600 Index has held an almost unbroken progression of higher reaction lows since 2011 and found support in the region of the 200-day MA on successive occasions during pullbacks. It is currently somewhat overextended relative to the trend mean so the risk of reversion has increased.

As investors cast around for cheap sectors, resources stand out as representing catch-up potential. The Euro STOXX Basic Resources Index which is heavily weighted by steel companies has been ranging at the upper side of a three-year base since October and a sustained move below the 200-day MA would be required to question potential for a successful upward break.