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Equities recover but still deliver ‘worst decade’ performance

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  • Equities recover but still deliver ‘worst decade’ performance

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GLOBAL - MSCI Barra, the provider of equity market benchmark data, said strong performance of major regional equity indices indicated a recovery in stock markets last year. Yet rival provider S&P Indices said equities also delivered the worst 10-year performance ever recorded during the Noughties.

According to figures presented by MSCI, the All-Country World Investable Market Index (ACWI IMI) generated a year-to-date performance of 34.14% yet the best performing markets were those in the emerging markets, in some cases delivering almost 119%.

Data suggested Sri Lanka was the best performing frontier market of all as it returned 173% in 2009, while Brazil was the strongest emerging market with a 113% return and Norway was the best developed market with an equity index return of 78%.

In contrast, Bahrain had the worst performing frontier market index as it lost almost 39% over the year, and Morocco was listed as the worst emerging market with a negative return of just under 12%, while Japan is named as the worst performing developed market albeit it generated a positive return of 2.98% in 2009, just less than the 3.88% return achieved in 2009 via the Finnish equity markets.

Any pension fund benchmarked in the MSCI EM IMI index would have seen a benchmark return of 70.39% in 2009, while the EM IMI small caps index scored higher with a return of 99.11%.

And yet data provided by S&P Indices suggests the period between 2000 and 2009 generated a negative benchmark return on the S&P 500. The US market registered its first 10-year decline in its history and ended the decade with a total return of -10.2% up to 18 December 2009.

According to data provided by the firm, if you invested $10m (€6.94m) in the S&P 500 index on 12 December 1999, a pension fund would now have just $8.981m left - a stark contrast to the earlier decade when the same sum generated $53.2m from $10m.

The main driver had been the 68% loss the S&P 500 suffered between June 2008 and February 2009, although it did manage to pull back between February 2009 and December by 26.8%.

Interestingly, the actual performance achieved would have depended in part on the benchmark chosen, as there were huge variance across the sectors. Energy, for example, generated a benchmark return of 144% over the decade, or an annualised return of 9.38% while utilities gained 62% over the decade.

The worst performing sector was the telecoms market which had generated a massive 1283% gain in the 1990s but then fell 55% in the 2000s.

S&P Indices believes 2010 and beyond will be better for investors as companies will be encouraged to pay out dividends, albeit they may be lower than in previous years.

The best performing S&P 500 stocks in the Noughties decade were Southwestern Energy and XTO Energy, generating returns of 50.2% and 41.75% respectively, while JDS Uniphase and AIG were the worst performers, falling 98.79% and 98.04% respectively.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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