Article at a glance:

A closer look at the bear in Europe

When the tech bubble collapsed in 2000, much of the US market's pain was concentrated in the information technology and telecommunications sectors—as well as among the largest companies in the S&P 500 index. Europe's harsher decline affected more sectors, but in both markets changes in overall P/E ratios largely shaped the bubble and its aftermath. In other words, the market responded more to expectations than to actual business performance—on the way up and on the way down alike.

The take-away

Given past patterns, European markets will generate around 6.5 to 7.0 percent real returns over the next ten years. The restoration of peak market levels will take longer in Europe than in the United States because of the sharper rise and decline of the European bull market.