Equities close to recovering losses seen since the on-set of the credit crisis

UK equities have started to recover from the substantial losses incurred between 2007 and 2009, according to latest research from Lloyds TSB Private Banking. Since March 2009, UK equity prices have grown by 56%, partly offsetting the 43% decline from the all time peak in October 2007 to the low point in March 2009.

A decade of two halves

Overall, the UK stock market has risen by more than half in value (53%) in the 10 years since November 2002, outpacing consumer price inflation of 37.5% over the same period. Price performance in the second half of the decade has, however, been markedly different from the first five years. Stock prices grew by 72% from November 2002 to October 2007; during this period consumer prices grew by 17%, therefore providing investors with a significant real rate of return.  Strong economic growth of almost 3% a year, on average, during the period was a key factor helping to drive up equity prices.

The onset of the credit crisis in mid-2007 marked the end of the bull market, with share prices nearly halving over the next 18 months as the UK economy contracted by close to 5%. Whilst these losses have since been recouped, equity prices remain 11% below their 2007 market peak.  In the past year, UK equity values have risen by 11%, having fallen by 4% in 2011.

Consumer Goods the best performing sector over the past decade

Several sectors have seen share values more than double over the past 10 years. Consumer Goods has been the best performing sector, recording an increase of 250%; followed by Software & Computer Services (192%), Basic Materials (185%), Industrials (179%) and Utilities (135%).  The worst performing sectors over the past 10 years have been Financials (-19%), Healthcare (34%) and Consumer Services (49%).

Not surprisingly, most of this growth came in the period before mid-2007.  In the period since then, share prices in several sectors have grown more modestly, with the best performing sectors of Software & Computer Services, Consumer Goods and Healthcare rising by 69%, 53% and 20% respectively. The worst performing stocks during the same period have been Financials (-39%), Basic Materials (-17%) and Telecom (-14%).

In the past year, the best performing sectors have been Software & Computer Services (27%), followed by Industrials (22%), Consumer Goods (21%) and Financials (20%). Two sectors have seen a fall in their average share; Basic Materials (-10%) and Oil & Gas (-6%).

Nitesh Patel, economist at Lloyds TSB Private Banking, commented: "It is encouraging that UK equities have rebounded strongly since Spring 2009, partly offsetting the decline in prices in the eighteen months from the start of the financial crisis in mid-2007 to the low point in March 2009. This improved performance has come even though the economy has been fragile for much of the period.

"In terms of sectors, the best performance for the past five years has been in Software & Computer Services. This sector's relatively strong performance may be the result of increased IT investment as firms strive to make efficiency gains through improved IT systems. Increased spending on data centres and so-called "cloud computing" has also boosted sector activity."