Even though bad news from Greece has been dominating the headlines recently (and a couple of times before that), European stocks have had a great run so far this year despite falling back in June, with Denmark, Italy, Ireland and Portugal leading the way, reports Barclay’s Q2 Market Review. And even though the ECB kicked off its own round of QE this year, German bunds were among the last places you wanted to be.

The takeaway is that investors expect Europe to finally start growing again, even if fears over deflation and a possibly messy Greek exit present obstacles along the way.

European growth stocks outperforming value is a major 1H15 trend

European growth stocks in particular have done well, continuing to outperform European value since then last August (with plenty of bumps along the way of course) and currently up 9.7% for the year. The same has been true for US and global growth indices which have both outperformed value so far this year.

Economic data surprise (not how good it is, but whether it meets expectations) has been negative in the US in recent months, though it’s starting to push back toward neutral. Economic surprise had been positive in Europe ex-UK for most of the year but has recently fallen toward zero, while it has been mildly negative in the UK. Economic data surprise had also been recovering in China after reaching the lowest point in more than a year, but the graph below doesn’t show the recent market crash which obviously will pull it further down.

S&P 500 is more expensive than other developed market indexes

The S&P500 (SPY) continues to look expensive compared to other stock markets (as well as its own historical average, though that isn’t shown here) with 18.0x PE multiple, compared to 16.5x for the FTSE100 and 16.8x for the Stoxx600. EPS growth has also been weaker for the S&P 500 than for other indexes, which makes sense if you think that the US stock market is fully valued and doesn’t have any more rapid growth left in it. As ever, EPS growth forecasts in future years are sunny, while this year’s numbers have to be grounded in what we’ve actually seen so far.

Earnings revisions have been steadily upward for Europe, and if it weren’t for the uncertainty surrounding Greece’s standing in the eurozone it seems like European stocks could take off even more.

While emerging markets are cheap overall, the MSCI EM index has a 12.6x PE multiple, that’s certainly not true across the board as Russia and Mexico are valued at 20.0x. The Shanghai Composite is listed here as trading at 18.5x, but it’s been falling so quickly recently that it’s probably better to wait for things tosettle down before putting much weight on broad metrics like index PE.

EM Asia is slightly cheaper than the EM average and has almost twice as much EPS growth, with South Korea in particular being valued at 11.0x and expected to hit 43.1% EPS growth this year.