Lloyds Private Bank's investor sentiment index tracks the confidence of the UK investor, whilst investigating the popularity of 11 different asset classes.

December saw UK investor confidence increase for the third month in a row, according to the latest sentiment index from Lloyds Private Bank. Investor confidence reached a 12-month-high, rising from 1.1 per cent in December 2016 to 6.4 per cent this year.

Emerging markets top the ranking in total investment returns and are at a high level of investor optimism. With a total return of 29.3 per cent year to date, emerging markets equities have achieved an even better performance than equities overall (+19.1 per cent).

Gold is still the most popular asset class, despite a six per cent drop since last December, from 44.5 per cent to 37.9 per cent. It did rise by 0.1 per cent from November. Closer to home, sentiment fares less well, with current readings for UK property crowned the biggest loser of 2017, dropping from 25.3 per cent last December, to 14.2 per cent this month. However, this is not reflective of actual asset class performance, which, while somewhat volatile across the year, has in fact increased by 9.3 per cent over the past 12 months.

The biggest monthly winner for December is US shares, with confidence rising 5.8 per cent to 5.0 per cent. The latest uplift coincides with a steady improvement in readings over the year which increased by 12.0 per cent in sentiment and 22.2 per cent in performance year to date. While confidence in UK shares remained somewhat stagnant, with a small dip of 0.6 per cent for the month, sentiment towards other UK asset classes has improved somewhat, with decreased pessimism for UK government bonds (3.25 per cent increase, now standing at -2.48 per cent) and UK corporate bonds (1.51 per cent increase, now standing at -3.65 per cent) this month.

In a year with so much uncertainty and strong performance by equity markets across the globe, it’s intriguing to see that UK investors feel more optimistic now than they did this time last year,” said Markus Stadlmann, chief investment officer at Lloyds Private Bank. “We have consistently referenced Emerging Markets shares as the standout ‘turnaround story’ of the year and they are not only much improved in terms of investor sentiment, but also the best performance return - the other stellar performers being Japanese and US shares."

Stadlmann added: “Our economic and financial markets outlook is positive for a limited number of asset classes. Then again, we will de-emphasise quite a few investments which were pillars of our success in previous years. 2018 could prove to be an important year for identifying potential turning points in the investment cycle.