The total market capitalization in major European nations has not kept pace with changes in the gross domestic product, as shown by this excellent chart (h/t Cullen Roche) from Guggenheim Partners.

“A country’s market capitalization as a percent of GDP is a useful indicator in assessing whether an equity market is under- or overvalued. Making direct comparisons between developed markets and emerging markets can be difficult, however, because the latter tend to have less developed stock markets and lower market capitalization to GDP ratios. A more useful indicator is to compare a country’s ratio to its historic levels. Based on current differences from previous 10 year averages, European markets, especially Italy, Spain, and France, appear particularly undervalued and therefore attractive. Additionally, the BRICs (Brazil, Russia, India, China) countries are currently below their averages, suggesting now may be a good buying opportunity.”

Russia somehow has a market cap to GDP ratio that is nearly 50% below its average from recent years.