Tipping ten stocks that would see out 2008 unscathed looked a tall order on New Year’s Day. Halfway through the year that task now seems insurmountable.

That is a roundabout way of giving warning that the fortunes of the Tempus Ten have taken a turn for the worse over the past three months. The FTSE all-share index has barely budged over that period, losing just six points, to take its year-to-date loss to 14.6 per cent.

In contrast, what were the four worst-performing stocks in the portfolio have only extended their deficits further, such that, having fallen 13.6 per cent at the end of March, the Tempus Ten is now down by an uncomfortable 22.1 per cent.

That setback means that what was modest outperformance against the FTSE all-share at the three-month stage – a paltry, but precious 0.8 percentage points – has turned into thumping underperformance of 7.5 percentage points. In so doing, the portfolio has fallen short of all three of the aims under which it was assembled: to record positive returns in absolute terms; to exceed the return that could have been achieved holding cash in a deposit account paying Bank of England rates; and to outpace the FTSE all-share.

True, the decision to eschew banks, housebuilders, retailers and property developers – sectors whose depressed year-end valuations might have tempted bottom-fishing – has prevented an even greater loss.

However, the tactic that has badly backfired thus far is the exclusion of any natural resources stocks – the miners and oil and gas producers whose record valuations continue to prop up the headline levels of London’s stock market indices. If there is a consolation, it is that, once natural resources stocks are stripped out of the FTSE all-share, the index would actually be showing a 21 per cent loss for the year to date – a level from which the Tempus Ten is only a percentage point adrift.

Perhaps the greatest disappointment at the halfway stage is not that the first quarter’s four conspicuous underperformers have performed even worse in the second quarter – of which more later – but that the star after three months, Smith & Nephew, has, through an unexpected blow, now also joined the losers. In May, the maker of medical devices disclosed that it had uncovered “unethical” sales practices at several European offices of Plus Orthopaedics, its much-vaunted $889 million (£447 million) Swiss acquisition of last year. About $100 million of sales were affected, which is likely to lop $25 million a year off S&N’s annual profits. Having been nearly 11 per cent up in March – to be the second-best performer in the FTSE 100 – its shares are now down more than 5 per cent.

That means that the mantle of the portfolio’s top performer – for which read the only stock showing a profit – has passed to Smiths Group, the engineering conglomerate now under the guidance of Philip Bowman, the former Allied Domecq and Scottish Power chief executive. The shares have responded well to last month’s plans to halve head-office costs and potentially move the company’s tax domicile outside the UK and, having been down 10 per cent after three months, are now nearly 5 per cent ahead.

Capita Group, the next best performer, off 3 per cent, gives little cause for concern, having so far fulfilled its function of providing utility-like defensiveness. The outsourcing specialist continues to buy back its own shares and to make bolt-on acquisitions and should benefit from a squeeze on government spending that accelerates the transfer of services into the private sector. More worrying is the recent reverse for Rexam, the packaging group, down nearly 7 per cent, where raw material concerns have again come to the fore. Whereas it was aluminium prices that once troubled its beverage can operation, current worries centre on the effects of record oil prices on Rexam’s recently expanded plastics division.

The less said about the faltering four the better. BPP Holdings, the training specialist, off 23 per cent, has been undermined by nothing more than poor liquidity. In contrast, its fellow laggards have suffered a series of hammer blows: Johnston Press, down 70 per cent, had a £150 million rights issue and a cash injection from a Malaysian investor; Wolfson Microelectronics, off 42 per cent, had the long-feared loss of its audio chip contract for the next generation of Apple’s iPod Nano: and Northern Foods, down 36 per cent, had the drag from its pension fund. However, yesterday’s purchase of £100,000 of shares by Stefan Barden, Northern’s chief executive, as his second big buy this month, provides reassurance.

Growing inflationary pressures and a gathering consumer recession suggest it is far too early to contend that the Tempus Ten is over the worst. So, the best short-term hope must be a perverse one: that the wider stock market gets even worse (courtesy of an oft-predicted slowing of the natural resources boom), if only to make the portfolio’s relative performance look better.

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