NEW YORK (TheStreet) -- Sorry Uncle Sam, but don't be surprised if European stocks beat U.S. indices in 2014.
Europe exchange traded funds generally posted significant gains in 2013, yet still lagged their U.S. counterparts. The Vanguard FTSE Europe ETF (VGK), for example, is up almost 18% so far this year. That's impressive, although not compared to a 28% rise in the S&P.
Don't expect it to happen again this coming year, says S&P Capital IQ Sr. Director Todd Rosenbluth.
"We expect the European recovery to pick up steam in 2014, especially in periphery nations like Spain and Italy which have finally bottomed out," says Rosenbluth, adding that financial stocks will likely lead the way.
Rosenbluth's top two picks are the VGK, as well as, the iShares MSCI EMU (EZU).
"These ETFs offer diversification at a low cost, which is exactly what you want if you plan to rebalance your portfolio with a heavier Europe weighting," says Rosenbluth.
-- Written by Gregg Greenberg