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Why Barry Ritholtz is bullish on Europe...and emerging markets

“The Governing Council strongly emphasizes that it will maintain an accommodative stance of monetary policy for as long as necessary,” Mario Draghi declared Wednesday. Whether the European Central Bank's ongoing support will help the region's struggling economy -- the official unemployment rate is 12% -- remains to be seen. But easy money should continue to give a boost to European stocks, which surged in the second half of 2013 and enter 2014 as one of Wall Street's favorite picks.

Related: The emerging markets selloff will continue, but that's GREAT for the average American

"I don't want to create the impression Europe is Socialist paradise and everything is fine...there are a lot of structural problems," says Barry Ritholtz, CIO of Ritholtz Wealth Management. "But they are addressing them and slowly getting better as opposed to 'stock up on bottled water and food, Europe's going back to Middle Ages.'"

Indeed, there have been some "greenshoots" coming from Europe, most recently Wednesday's report that EU retail sales rose in November at the fastest pace in 12 years.

But "the fear is still out there," Ritholtz says, citing borrowing costs and spreads for the debts of, most notably, Portugal, Greece and Spain.

The threat of a eurozone meltdown has faded from the headlines but ongoing concerns created a situation where European equities were trading at a "significant discount" to historical valuations in 2013. Ritholtz, who started recommending the Vanguard FTSE Europe ETF (VGK) to clients last spring, remains optimistic about European assets based on relative valuation vs. U.S. stocks (which he says are "not crazy expensive but no longer cheap.")

In being bullish on Europe, Ritholtz has a lot of company on Wall Street. But his optimism on emerging markets puts him distinctly in the minority as 2014 gets underway.

"If Europe is cheap, emerging markets are really cheap," he says. "The question is: how much cheaper are they going to get? Is there room for more downside? Definitely. But based on valuation and the fairly overwhelming negative sentiment...we don't really care about being a few months early."

For emerging markets, Ritholtz recommends the iShares Emerging Markets Dividend ETF (DVYE), which he says is less concentrated and less exposed to bank stocks than the more popular iShares MSCI Emerging Markets (EEM).

Related: Why you should care that China's economy is slowing

"That's the big problem with both Eurpe and emerging markets - you end up with a lot of banks that are being propped up, unlike the U.S. where we have the 'too big to fail' banks," he quips.

Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo! Finance. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com