The global markets are beginning to reflect the positive economic news coming out of US and central banks, monetary policy. With an average return increase of 2.8 per cent for nine key asset classes, Lloyds TSB Private Banking research reveals that the last 12 months have provided equity investors especially, with high returns. 

This is in contrast to June 2011 - June 2012, when the average return fell into negative territory for the first time since 2009.

As mentioned, international and UK equities had the highest returns among the nine assets classes, with a surge in global equity markets providing investors with an average return of 22.1 per cent. Similarly, UK shares enjoyed annual returns of 17.9 per cent. Lloyds puts the positive developments down to recent economic improvements in the US:

“Gains have been driven by improving global economic growth, particularly in the US, and expansionary monetary policies from the main developed market central banks,” said Nitesh Patel, economist at Lloyds TSB Private Banking.

“By contrast, precious metals such as silver and gold have fallen sharply in price, in large part due to a decline in demand and fears of European governments reducing their gold holdings to cover the bailouts,” Patel added, referring to the drop in gold and silver prices which has made precious metals the worst performer in the past 12 months.  

Having been the best performer three times since 2008, precious metals have significantly underperformed against other assets classes, with prices falling by 20.9 per cent in total.

Conversely, the housing market is improving significantly, with returns from UK residential properties growing by 7.8 per cent due to average house prices rising. Commercial property in the UK resulted in a lower, but still positive return, with the IPD Index (which measures total returns on commercial properties) at its highest level since October 2007.

Other good investments, include natural gas and cotton, which both ranked as the top performing commodities as prices rose by 30.1 per cent and 18.3 per cent respectively. Of the worst performing commodities, increased production in the past year has contributed to coffee prices falling by 30 per cent – the largest decline among the commodities in the Lloyds review, which also revealed losses for investments in sugar and wheat.

Lastly, international investments are proving to be strong bets as international bonds outperformed UK bonds, by more than one per cent. This is in part based on investors taking an upbeat stance after the US overcame the threat of the fiscal cliff. Meanwhile, returns on UK bonds suffered from weak growth prospects for the UK economy as well as rising inflation for much of the first half of 2013.

Looking forward, Patel explained that “prospects for asset prices for the rest of the year will critically depend on monetary policy developments, the impact of fiscal austerity measures in Europe and the UK, and the extent to which the Chinese economy slows down."

The Lloyds survey tracks nine asset classes, including UK shares, international shares, UK bonds, international bonds, cash, commercial property, residential property, commodities and precious metals, from June 2012 to end of June 2013.

Lloyds TSB Private Banking is part of the Lloyds Banking Group and as of 31 March 2012, the unit had £7.2 billion ($11.1 billion) in assets under management.