Cullen Roche of PragCap had a post heard around the world about Market Cap to GDP hitting the overvalued mark (according to Warren Buffett). Today, BAML is out with a new note on European equities markets. Unfortunately they do not discuss Market Cap to GDP in detail, but they do have some fascinating stats comparing many countries using the metric showing the difference between now and 1989. Switzerland is by far the most overvalued, followed in second by the UK and in third the US. The cheapest markets, China, Emerging and Europe. One of the most interesting aspects about the chart is that every single market is at a far higher valuation today than in 1989 bar Japan. See the chart on market cap to GDP and some data specifically on BAML below.
Also See A Look at Current S&P 500 Valuation By Sector
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy Read More
US Versus Europe: Market Cap to GDP
Even after three years of crisis, Europe represents the largest economic bloc in the world. The EU-27 had a combined GDP in 2012 of $16.6Trn of which the Eurozone accounted for $12.2Trn; by contrast 2012 US GDP was 15.7Trn. But Europe’s economic footprint is not mirrored by its equity market capitalisation. The EU-27 has a combined market cap of $11.6Trn, of which the Eurozone makes up half ($5.8Trn). US equity market cap is $18Trn Market Cap To GDP is 115%. Nevertheless, Europe remains the world’s second largest stock market, and navigating the equity universe successfully in the post-crisis world requires a thorough mapping of sector dynamics and some new tools for valuation.
A Look at Current S&P 500 Valuation By Sector