Improving economy helps boost UK equities
31 October 2013
- FTSE All Share Total Returns index 25% above pre-crisis peak
Total returns earned by UK equity shareholders have averaged 16.9%1 over the past twelve months, according to latest research from Lloyds Bank Private Banking.
This compared with an average return of 12% in the preceding 12 months. The increase in average returns on the FTSE All Share Total Returns Index appears to have been driven by an improving economy, rising consumer confidence and growing household spending. Eight of the ten leading industry sectors have seen shareholders enjoy double digit returns in the past year.
Since 2009, when the FTSE All Share Returns Index fell to the second lowest reading since the index began in 1986, total returns on UK equities have averaged 126% - an average annual rate of 18% - . The majority – almost three-quarters – of this return is attributable to the 92% rise in equity prices2 over the period. This has more than reversed the decline from the peak of the market in July 2007 to March 2009 when the FTSE All Share Total Returns Index fell by 45%. The Total Returns Index currently stands 25% higher than in July 2007.
Consumer Services the best performing sector over the past year
Equities in the Consumer Services sector have provided the highest average returns, 33.7% in the past year - double the returns for the stock market as a whole. This sector, which includes retail, media, and travel & leisure, has seen a resurgence in equity values as growth in household spending has picked up in the year to July, rising by close to 2%3 in real terms.
Five other market sectors have seen returns out-perform, or match, the FTSE All
Share Total Returns Index in the past year.
Shareholders in Technology stocks have seen average returns of 29.7%. This sector's relatively strong performance is grounded in increased IT investment as firms strive to make efficiency gains through improved IT systems. While innovations in the "digital universe" (e.g. software-as-a-service and other cloud computing services) is helping businesses reduce costs and raise productivity.
Technology stocks are followed by Telecom (with average total returns of 28.4%), Financials (26.9%), Industrials (26.7%) and Health Care (18.1%). The worst performing sectors have been Basic Materials (-1.7%) and Oil and Gas (1.1%). Weak residential construction in Europe has impacted negatively on the Basic Materials sectors, while in the UK construction output has been volatile in 2013.