(Bloomberg) -- When Goldman Sachs Group Inc. surveyed the audience at its annual global strategy conference this month about which stocks will be this year’s world champions, Europe emerged as the unlikely winner.

Since then, equity markets have experienced a major selloff and locked horns with a Federal Reserve preparing for aggressive interest-rate hikes. 

But the faith of investors in Europe’s potential as a safe harbor in turbulent waters remains intact.

“The European stock market seems more attractive in terms of valuation and less sensitive to price readjustments caused by the normalization of interest rates by the Federal Reserve,” says Francisco Simon, head of discretionary tactical asset allocation at Santander Asset Management. “This could be a buying opportunity for Europe against the U.S.”

It’s a view shared by most equity strategists -- from those at Citigroup to JPMorgan Chase & Co.’s team.

When asked about which region will outperform this year, Morgan Stanley’s own clients had exactly the same view as Goldman’s audience, while fund managers surveyed by Bank of America Corp. placed record bets on European banks.

“The banks in the U.S. have priced this tightening cycle reasonably well,” Norman Villamin, chief investment officer at UBP Wealth Management, said on Bloomberg Television. “On the European side, the markets haven’t really priced an ECB move on a meaningful basis yet, so there is still catalyst for European banks to benefit from that move should it come in the months ahead.”

After lagging the U.S. last year, European stocks have fared slightly better this month amid the turmoil, though a smaller drop is not exactly the prize that the region’s believers were expecting from 2022.

Europe has seen its fair share of false dawns before. And there may not be that much comfort from the Goldman survey. Last year, respondents’ favorite equity region was Asia, and it turned out to be a poor investment choice amid a regulatory crackdown and brewing crisis in China’s property market.

Still, the optimism about Europe appears well grounded. The region’s markets may be less exciting, but that lack of flamboyance is becoming an advantage as central banks turn off the taps of abundant liquidity that helped last year’s ferocious rally.

The fate of major European indexes doesn’t depend on a handful of mega-stocks with an outsized weighting on the benchmarks, such as Apple Inc., or Amazon. The Nasdaq 100 has dropped almost 15% this year, compared with less than 4% for Europe’s Stoxx 600 Index.

Europe also doesn’t have the type of super hyped-up stocks seen in the U.S., for example those with virtually zero sales and a market value -- albeit short-lived -- of $100 billion.

With the post-pandemic economic rebound now past its peak, and monetary policy set to normalize, boring is good. Take the outperformance of the U.K. benchmark FTSE 100 index, dominated by old economy dinosaurs such as BP Plc., Rio Tinto Plc and British Airways owner IAG SA.

It’s up 2.3% so far this year, one of the rare slivers of green in a world of red.

Equity strategists of Morgan Stanley have said that the stars are aligning for U.K. stocks, just as “winter is here” for U.S. markets.

Metaphors and pop-culture references notwithstanding, Europe is forecast to benefit from a real shift in global markets. Rising interest rates mean investors have been flocking to cheaper value stocks, which are set to benefit from a growing economy and higher yields, such as banks.

This great rotation to value has buoyed stocks such as Standard Chartered Plc and Tenaris SA -- which manufactures steel pipes -- making them among the best performers in Europe.

Meanwhile, high-flying, but still unprofitable, U.S. tech companies are coming back to earth. Equity strategists say that even if the rotation pauses for a while, it still has legs. Max Kettner at HSBC Holdings has ended his longstanding U.S. buy call, and recommends instead an overweight position on the euro area.

Europe’s economy may also get a boost from a jointly-financed European Union recovery fund. Forecasts compiled by Bloomberg show that the euro area may grow faster than the U.S. this year.

Meanwhile, U.S. consumers are facing more headwinds from higher inflation and a central bank determined to hike rates to tame it, in stark contrast with the European Central Bank’s approach. 

The disparity is reflected in corporate earnings expectations, which are rising faster in Europe than in the U.S.

Europe is not without risks, including trouble from higher rates, which could make life difficult for some over-indebted countries like Italy and Greece.

There’s also a major geopolitical threat right on its doorstep, and fear of a military conflict in Ukraine has weighed on risk appetite. Still, even that has yet to fully shake optimists.

“While developments here could significantly accentuate current energy shortages in Europe, it seems unlikely that the conflict will have a lasting economic impact on the continent,” says Paul O’Connor, head of multi-asset at Janus Henderson Investors. “With some bad news already priced in here, we see future developments on this front as offering fairly symmetric risks to European stock markets.”

©2022 Bloomberg L.P.