American stocks are the world's worst this year

When it comes to stocks, America is the big loser this year.

The S&P 500 (^GSPC) is up just 1.6 percent through Thursday’s close, making it the worst among major market indexes for 2015.

In Asia, India’s BSE Sensex is up 5 percent, Japan’s Nikkei (CBOE:.NKXQ) has risen 14 percent and Hong Kong’s Hang Seng (Hong Kong Stock Exchange: .HSI) is also up 14 percent.

In Europe, the U.K.’s FTSE 100 (FTSE International: .FTSE) is up 6 percent, France’s CAC 40 (Euronext Paris: .FCHI) has climbed 22 percent, Germany’s DAX (^GDAXI) is up 24 percent and Russia’s RTS (Exchange:.SPRTSTR) is up 27 percent. In fact, the only European indexes that are underperforming the U.S. can be found in Romania, Croatia and Greece.

Some American investors say that foreign stocks are still a bargain, compared to domestic equities.

“I would definitely say investors should take some money off of the U.S. large caps and maybe allocate some more into international sectors, particularly Europe and Japan,” said Erin Gibbs, equity chief investment officer at S&P Capital IQ. “Yes, our economy is definitely stronger, but when you look at corporate earnings growth, you really see a huge divergence.”

Gibbs notes that S&P 500 earnings are expected to be flat, while analysts think earnings in Europe and Japan will rise by 12 percent and 15 percent, respectively, over the next year. At the same time, earnings multiples abroad are lower than in the U.S., so investors are getting a better deal.

“I still see further appreciation going into the next year because of this significant growth, because they’re coming off of easy [comparisons] and lows,” Gibbs said.

Due to the low growth prospects and high valuations for large-cap stocks, Gibbs advises that investors diversify at the very least.

“If investors are really just focusing on the S&P 500, think about spreading that out, allocating into international as well as down on in the market-cap chain,” she said, referring to small- and medium-cap equities

Taking a technical tact, Rich Ross of Evercore ISI says that, “There’s plenty of upside around the world, [and] perhaps a little less so in the U.S.”

But looking at the S&P 500 chart, Ross calls for a trade up to 2,200 by the summer, which would represent a 5 percent rally from current levels.

“Don’t sleep on the U.S.,” Ross said.

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