Author Details

Anil Rao

Anil Rao

Executive Director, MSCI Research

Jean-Maurice Ladure

Jean-Maurice Ladure

Executive Director, MSCI Research

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Which Companies Lost Most in Europe’s Lost Decade?

  • European stocks trailed other major equity markets in the years since the 2008 global financial crisis.
  • We found that Europe-based firms with revenues outside of Europe weathered the decade’s stagnation better than firms whose sales came principally from within the continent.
  • Additionally, these “globalized” European firms increased their profitability edge over local firms in the years following the 2008 crisis.

One implication of a slowdown in globalization is the uncoupling of market performance across regions. The case of firms in the MSCI Europe Index is a notable example: Over the last decade and a half, European equities fell far behind their counterparts in the MSCI USA Index, as the region’s growth trajectory broke from that of the U.S. in the fallout from the 2008 global financial crisis (GFC). This followed many years in which both regions’ GDP grew at similar rates.

If uncertainties over deglobalization persist — whether from long-running declines in trade flows or more recent pandemic-related constraints — the Atlantic divide could widen further. Conventional wisdom suggests that European firms, which have tended to have more international revenue than those in the U.S., would be at risk.

To test this hypothesis, we ask: How have the most “globalized” European firms fared since the GFC?


Sales, interrupted

Before we address the question, it’s helpful to review some of the key differences between the U.S. and Europe following the 2008 crisis. The headline difference for equity investors, of course, is performance: The total return of the MSCI Europe Index was about 230%, while the MSCI USA Index returned just over 600%, from the market trough in March 2009 through September 2021.


European firms suffered from revenue contraction

Return contribution is annualized for the period from March 2009 through September 2021 for the MSCI USA and MSCI Europe Indexes, in gross USD.

Above, we break down each region’s annual return into earnings growth (profit margin expansion and sales growth), price-to-earnings expansion (valuation expansion), dividends and currency components.

As we can see, the difference between the regions was largely due to growth in firms’ earnings, and not merely expanding U.S. multiples. Sales, in fact, contracted among European firms — and most acutely for the largest companies. (Though it is worth noting Europe’s historically smaller representation of digital and technology-enabled firms, which took the throne of equity markets throughout the 2010s.)


Go global or go local?

But getting back to our question, we set out to uncover how the globalized firms in Europe performed compared with local ones, whose sales could be more sensitive to the European economy. To do so, we constructed two hypothetical portfolios using MSCI Economic Exposure data.1

The “Europe Global Portfolio” selected firms from the MSCI Europe Index with a higher proportion of their revenues generated outside of Europe, and included companies such as ASML Holding, Nestle S.A. and F. Hoffmann-La Roche AG. The “Europe Local Portfolio,” in contrast, selected firms with a higher proportion of revenues generated within Europe, and included companies such as Siemens AG, TotalEnergies SE and Iberdrola.2

Comparing performance, we found that the global firms tracked the return of local firms prior to the crisis, but began to steadily pull away from them thereafter.3


Global firms outperformed local firms following crisis

Returns are from January 2003 through September 2021 and are relative to the MSCI Europe Index. The dashed line indicates March 2009, corresponding to the trough of global equity markets.

Given the importance of profit margin in growing earnings, we next traced the profitability of each portfolio in the years following the crisis. As shown in the exhibit below, global firms maintained, and increased, their profitability edge against local firms over that period.


Global firms expanded profitability following crisis

The MSCI European Equity Model for Long-Term Investors (EULT) is used to calculate profitability and shown relative to the MSCI Europe Index. A higher z-score indicates the portfolio holds relatively more profitable firms.


Global revenues, global production

Finally, we matched all the companies in the MSCI Europe Index to their approximately 7,000 manufacturing and production facilities located worldwide. This step provided a measure of the degree to which firms with global revenues also had globalized operations and supply chains. Compared to local firms, global firms had a much higher share of their production outside of Europe, notably in the U.S., as shown in the exhibit below. One read of this result is that, by locating their operations closer to their end markets, global firms could have potentially adapted production and strategy to local-market needs.


Global firms had more of their manufacturing and production outside of Europe

We counted corporate facilities as of September 2021 and used MSCI’s asset-location database. Europe refers to firms in the MSCI Europe Index.

Though, intuitively, European multinational firms might appear to be more at risk if regions continue to decouple, we saw some nuance. In fact, our analysis showed that global European firms best weathered the decade-plus of tepid growth across Europe and the trend toward deglobalization.

The authors thank Gillian Mollod for her contributions to this blog.



1Firms’ ex-European revenue was converted to a standardized score and then used to select stocks for each hypothetical portfolio. A market-capitalization-times-score methodology was used to weight stocks, rebalancing quarterly. The number of stocks selected was chosen to approximately cover one-third of the parent index’s capitalization.

2Specific companies listed are the top three by weight for each hypothetical portfolio, as of September 2021.

3Past performance is not indicative of future results.



Further Reading

Did Deglobalization Add to Inflation Woes?

Global Investing Trends