For equity investors, the decade of the “noughties” must have seemed like a roller-coaster ride too far. Two precipitous falls in share prices and a major bull market in the middle of the period combined to leave most investors out of pocket, even if they had done nothing to their benchmark portfolios.

But, at the index level, which sectors contributed most and least to the negative return from shares during the ten-year period, and how did the composition of capitalisation-weighted benchmarks change? And are there any conclusions to be drawn for passive investing as a result?

The commonly used Eurozone blue chip equity index, the Dow Jones Euro Stoxx 50, gave a price return of -38.86% over the decade. The broader Dow Jones Stoxx 600 index, which consists of 19 industry “supersectors” (and includes non-Eurozone markets such as the UK) returned -32.78% over the period.

Dividends will have mitigated these losses somewhat (even if at the start of the period European equity yields averaged a miserly 1.7%), but for equity investors at the start of the decade capital appreciation was the name of the game and on that score company shares failed dismally as an investment.

In the US market, similar trends prevailed. Rob Arnott and John West of Research Affiliates stated the bald facts in a recent article on IndexUniverse.com: “The ‘naughts’ were the worst decade ever for U.S. equity investors, even after an astounding rebound in the past 10 months of 2009, during which the S&P 500 Index surged 55%.”

What contributed to the poor returns? A look at the top ten constituents of the capitalisation-weighted DJ Euro Stoxx 50 at the beginning and end of the decade gives a hint.

DJ Euro Stoxx 50 Top Ten Components, 31 December 1999

DJ Euro Stoxx 50 Top Ten Components, 31 December 2009

At the start of the decade, four of the top five Eurozone companies were involved in telecommunications, with Telefonica and Siemens making it six of the top ten as far as technology and telecoms overall were concerned, a testament to the “TMT” (technology, media, telecoms) bubble of early 2000.

By the end of 2009, from this group only Telefonica and Siemens remained in the top ten European companies by size, and the Spanish mobile and fixed line operator only retained its place after a substantial expansion of balance sheet from international takeovers and mergers. At the end of the decade, a diverse group including three energy companies, three banks, a healthcare company and a chemicals company filled in the other places in the Euro Stoxx 50 top ten.

The fall from grace of the technology and telecoms stocks can be seen most starkly in the following performance table, which gives the price returns of all the DJ Stoxx 600 supersector indices over the decade.

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