The benchmark Stoxx Europe 600 Index is on track to record its biggest first-half under-performance against the Standard & Poor’s 500 Index since 2013.
The index is down 5.8% year-to-date, while the S&P 500 is up 3.3%.
Relative to expected earnings, European stocks are the cheapest compared with US peers since early 2015.
The Stoxx 600 currently trades at 15.1 times earnings expected in the next 12 months, while the S&P 500 trades at 16.9 times.
The discount is even bigger when looking at price-to-book ratios, with the Stoxx 600 trading at 1.7 times book value, well below 2.8 times for the S&P 500.
European stocks have also experienced higher relative volatility. While the US VIX trades at 14, Europe’s VStoxx trades at 23, a much higher gap than the 10-year average of 4.5.
It’s in the investment flow data however that concerns about a so-called Brexit have been most visible.
Europe equity funds have seen $36bn in net outflows since the start of the year, reversing nearly a third of 2015’s inflows, according to data from Bank of America Merrill Lynch. Funds have seen net outflows for 17 straight weeks.
Goldman Sachs strategists said this week that US investors have been among the biggest sellers of European stocks, as they are very sensitive to shifts in risk aversion.
Europe’s discount to the US is not justified by economic data from both regions, says Roland Kaloyan, head of European equity strategy at Societe Generale, who points out that European growth forecasts have been resilient while the US GDP outlook has been cut.
Mr Kaloyan argues that European stocks’ poor performance compared with the US is set to end.
For Barclays equity strategists including Dennis Jose, equity investors have already priced in a high probability of a vote to leave the EU on June 23.