TWO years ago, when the euro area appeared on the brink of collapse and the US economy was buffeted by budget uncertainties, the best investment decision — it turns out, rather counter-intuitively — would have been to plough money into US and European stocks.

The two equity markets have significantly outperformed other asset classes in the two years to June 30, with the MSCI Europe stock index returning 56 percent, including dividends, in US dollar terms, and the S&P 500 index providing 50 percent total returns. Both outstripped Japan’s 35 percent gains and Asia ex-Japan’s 27 percent gains in US dollar terms by a wide margin.

This year has been no different. The benchmark US and European stock indices provided total returns of 6-7 percent in the first half, both outperforming Japan’s 0.8 percent, in US dollar terms. Asia ex-Japan caught up with US and Europe, with almost 7 percent gains.

Although easy gains are becoming harder to get, just like two years ago we remain upbeat about global stocks. We prefer equities in Europe, the US and Asia ex-Japan. European equities are ranked at the top because they are relatively inexpensive when measured against expected earnings and there is scope for earnings to accelerate over the next 6-12 months.

European Central Bank President Mario Draghi’s second-round stimulus measures — following his 2012 promise to “do whatever it takes’’ to rescue the euro — should unleash 400 billion euros (US$538 billion) in cheap bank loans to consumers and companies, starting in September. Record low interest rates are likely to provide an added boost by bringing down borrowing costs, while asset purchases by the ECB expected by year’s end should also help fight deflationary pressures.

In the US, there are signs that the economy is casting off a temporary blip in the first quarter, caused by an unusually harsh winter. The economy has regained all the jobs lost since the 2008 crisis and continues to add more. More than 200,000 new non-farm jobs were created for four straight months through May, the first time this has happened since 2000. As the job market improves, consumers – after years of paying down debt — are borrowing again to buy big-ticket items such as houses and cars.

As a result, US economic growth should accelerate toward a 3 percent annual rate by the final quarter of the year. The US Federal Reserve’s highly accommodative monetary policy, which it has promised to keep “for a considerable time’’ after the ongoing asset purchase program ends this year, is aiding the recovery.

A key change from the start of the year is an increasingly positive outlook for Asia. Credit availability has improved across the region and fund flows remain supportive for regional assets. As a result, we expect higher returns from Asian equities over the coming year, with stocks in Taiwan and South Korea among our top picks.

China’s economy seems to have bottomed, with the government drawing a line on the sand by reiterating a 7.5 percent growth target, after growth slipped below that level in the first quarter. Local governments will have to deliver that growth, aided by targeted bank lending to priority sectors.

South Korea and Taiwan

The Chinese mainland’s recovery should help exports from South Korea and Taiwan. The two Asian technology powerhouses are also likely to benefit from increased corporate IT spending in the US this year and from a gradual recovery in consumer demand in Europe. The improved outlook is already reflected in the upgrading of consensus economic growth forecasts for the two Northeast Asia economies for 2015. They are also the least vulnerable in Asia from an eventual rise in US interest rates.

In South Asia, India’s first majority government in 30 years following recent elections is a positive development. The strong mandate should enable the government to push through tough reform measures required to reverse three years of disappointing growth.

Prime Minister Modi’s call for “less government, more governance’’ will be tested as he goes about cutting wasteful spending and misdirected subsidies, and removes bottlenecks to jumpstart large-scale projects. The government plans to build 100 new cities over the next decade which, if properly executed, could see India repeating China’s urbanization miracle of the past two decades. Although Indian stocks have run up in anticipation of these developments, investors should look for opportunities to add India to their long-term portfolio.

Rising oil prices caused by renewed insurgency in Iraq could provide just that window of opportunity because it could result in greater volatility in stock prices. High oil prices are a risk for Asia, particularly for India, because most economies in the region, with the exception of Malaysia, are net importers of crude oil. However, we believe the Iraq situation should have limited impact as long as the insurgency is restricted outside the crude oil producing region in southern Iraq.

Besides stocks, high yielding emerging market government bonds offer increasingly attractive value. Investors can get yields as high as 7 percent, while credit risks remain comfortable. These bonds are less expensive relative to developed market high-yield corporate bonds, when measured in terms of their historical yield differential with US Treasuries.

Some Asian local currency bonds offer good value as well. The 4 percent yield on offer from a broad regional exposure is likely to mitigate any currency-related risks, given the historical magnitude of exchange-rate depreciation in the region. Besides the attractive yields, such bonds can also help investors diversify away from the risk of rising US interest rates because some Asian central banks are inclined toward easing, rather tightening.

High quality yuan-denominated onshore bonds, which currently yield around 6 percent, or their offshore counterparts, which yield around 4 percent, could provide a decent bonus to investors through an appreciation in the Chinese currency.

As we enter the second half of the year, strengthening growth, rising corporate profits and loose monetary policy explain why we remain bullish on Europe and US equities and expect them to outperform bonds over the next 12 months. Meanwhile, a recovery in China is making Asian stocks and bonds increasingly attractive.