The market rally finally seemed to flag on Monday and the Dow fell below 21,000 for the first time since breaching this barrier on Mar 1. Geopolitical tensions and fresh allegations made by President Trump against his predecessor combined to drag stocks lower. Also adding to investors’ worries was an imminent rate hike, following indications to that effect by Fed Chair Janet Yellen.

In Europe, the fate of stocks was somewhat similar, partly due to the upcoming rate hike. However, most of the losses for the day were caused by disappointing news from Deutsche Bank AG (DB – Free Report) . This was a notable departure from recent trends in the European markets, where stocks have been notching up steady gains

At present, there is a compelling case for looking beyond the success of U.S. stocks and diversifying into other markets, particularly Europe. Lower valuations, earnings and sales growth and considerable price gains mean that adding stocks from the region to your portfolio makes for a great investment option.

Recent Performance Strong, Earnings & Sales Grow

While the U.S. rally following the declaration of election results has caught the imagination of a large chunk of investors, European stocks have been making steady gains in 2017. Since Dec 1, the iShares MSCI Germany ETF, which is good indicator of the health of Europe’s most prominent equity market, has gained 12.8%. Over the same period, the S&P 500 gained 8.6%, which reflects the extent to which German stocks have outperformed their U.S. peers.

Going on to examine the relatively less popular Italian and Spanish markets, one finds that each of them have also outperformed their counterparts in the U.S. The  Shares MSCI Italy ETF and the iShares MSCI Spain have gained 10.7% and 11.5%, respectively since Dec 1. A look at the entire region as a whole also reveals a similarly optimistic picture. Over the same period, the Vanguard FTSE Europe ETF has gained 9.4%, slightly higher than the S&P 500.