Earlier this year we examined the contours of the recent stock market decline in the United States, by most typical measures the worst bear market since the Great Depression.1 We found that much of the market's travails were concentrated among the information technology and telecommunications sectors, and among the largest companies in the Standard & Poor's 500 index—those megacapitalized companies whose market capitalization surpassed $50 billion. An update of this analysis in June confirmed our findings: combined, the S&P 500 index's 154 IT, telecom, and megacap stocks were responsible for the entire 33 percent decline from January 2000 to June 2003. The other 346 companies in the index actually contributed a positive 5 percent, preventing the overall average from sinking even further.
Such was the shape of the US bear market. To explore what took place in equity markets in the United Kingdom and continental Europe, we conducted the same analysis there.
Anatomy of a European bear market
Using the FTSE Euro 300 index as a proxy for top-line returns, we discovered that the European boom represented a more widespread inflation of stock price levels than in the...