France vs U.S. Stock Market Valuations

The market capitalization of stocks in France reached a new all-time high priced in Euros today of €2.239 trillion. For the first time in almost a full decade, the market cap of French stocks has surpassed France’s GDP. In comparison, the market cap of U.S. stocks has been north of U.S. GDP for the past four years.

U.S. stocks are currently worth 129.95% of GDP vs. French stocks now worth 100.71% of GDP. Although the U.S. market cap/GDP ratio is only 12.57 percentage points away from reaching its all-time high set in March 2000 of 142.52%, the French market cap/GDP ratio remains 27.7 percentage points away from its all-time high set in August 2000 of 128.41%.

The U.S. market cap/GDP ratio is currently 29.24 percentage points above the French market cap/GDP ratio. In May 2000 near the peak of the dot-com stock market bubble, the market cap/GDP ratios of the U.S. and France came within 1 percentage point of each other. In June 2007 at the peak of the next global stock market bubble, the French market cap/GDP ratio actually surpassed the U.S. market cap/GDP ratio by 2 percentage points. Look for their ratios to rapidly converge in the upcoming months, just like in 2000 and 2007 – due to U.S. stocks being extremely overvalued relative to French stocks!

Currently, U.S. stocks are worth $24.52 trillion or 10.08X more than the market cap of French stocks priced in USD of $2.431 trillion.

This compares to a long-term average of U.S. stocks being worth 8.03X more than French stocks. Last month, U.S. stocks briefly touched a record high market cap of $25 trillion, where they were worth a record 11.16X more than French stocksa stunning two standard deviations above the long-term average U.S. to France market cap ratio!

NIA predicts that valuations of U.S. stocks relative to French stocks will normalize within the next 6-12 months!

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