European stocks are attractive, Julius Baer fund manager Retro Stiffler said, pointing out that markets in the region have done very well during the recovery following the crisis.

Mr Stiffler, who manages the Swiss bank’s Europe Growth Stock Fund, said that European markets have in fact done better than other markets. He believes that inflation is likely to remain low in Europe at somewhere between one and two per cent for the next quarters, making it “an ideal environment for equities”.

He added that in contrast to emerging markets, where he believes a rise in interest rates is likely as economies in Asia are starting to grow above their potential, in Europe this will not happen in near future, leading to upside potential for investors.

“Finally, European stocks are attractively valued, even when taking into account higher growth in other regions,” he added.

Looking at growth stocks, he said that they normally benefit during recoveries. The US has already returned to growth in the third quarter of the year and he thinks that Europe could do so too by the end of the fourth quarter.

“After this year’s rally for undervalued stocks, firms with the highest estimated earnings growth for 2010 are currently at below-average valuations, we therefore expect a gradual shift to growth companies,” he said.

“Among growth stocks, preference is given to companies with high return on equity. Historically, this strategy offers a clear outperformance, as growth coupled with high return on equity still generates considerable shareholder value,” he added.