Investor / An insider's guide to the market: For investors, 2005 will stand out as a vintage year when nearly all the main asset categories delivered good to excellent returns.

The star turn came from equity markets, which built on the recovery in share prices that began in 2003.

However, not to be outdone, property markets both at home and in many overseas countries continued to deliver very strong returns.

Indeed, it is difficult to find any asset class that did badly in 2005. Commodity prices continued to storm ahead during the year, highlighted by the rise in the gold price, which hit a 25-year high of $537 (€452) per ounce.

It has since fallen back to the $500 mark, but this remains well above the year low of $418.

The oil price maintained its upward march, hitting a high of $67 per barrel (Brent Blend) during the year, compared with a low of $28. It is currently trading at just under $60 per barrel.

Surprisingly, this surge in commodity prices has so far had little impact on inflation and inflationary expectations.

This can be gauged from the behaviour of global bond markets in 2005.

At the beginning of the year, it was generally expected that strong economic growth and rising short-term interest rates would create the conditions for rising bond yields. To the surprise of many analysts, the combination of strong growth, rising short-term interest rates and rapidly rising commodity prices did not have the expected impact on bond yields.

In the US, the 10-year treasury yield started the year at 4.2 per cent and is currently trading at 4.5 per cent . The yield on the US 30-year bond has in fact declined marginally over the year from 4.8 per cent to 4.7 per cent .

In the UK, the 10-year yield has fallen from 4.5 per cent in early 2005 to the current level of 4.2 per cent, while the yield on the 25-year bond is now as low as 4 per cent .

In the euro zone, bond yields fell across the maturity spectrum by about 0.25 per cent during the year. As a result, returns on bond portfolios were generally well ahead of inflation in 2005, although well below the stellar returns from equities and property.

Within equity markets, Europe and Japan did far better than the Americas.

European equity market indices have risen in a 15-20 per cent range in 2005, compared with a rise of only 2-5 per cent from US equity market indices.

However, even European markets were left in the shade by the resurgent Japanese market, which rose by over one-third during the year.

When currency movements are factored into the equation, the discrepancy in returns does narrow.

In particular, the strong recovery in the dollar in 2005, up by approximately 13 per cent against the euro, means that US equity markets did quite well in euro terms.

Stock selection within the Irish market played a big part in the portfolio returns of Irish investors during the year.

Amongst the larger stocks, defined as those with a market capitalisation of over €3 billion, Ryanair, Anglo Irish Bank and CRH produced returns well above the average.

On the downside, Elan Corporation was the big faller due to the sudden withdrawal of its MS drug Tysabri.

With Tysabri now likely to return to the market in 2006, the share price has almost doubled over the past six months.

Despite this, the shares are still trading at only 50 per cent of their year-opening level.

The best returns among the mid-cap companies - with a market capitalisation of €1-€3 billion - came from FBD, C&C, Jurys Doyle and Kingspan.

Performances from the food companies, Kerry and IAWS, were disappointing as their share prices treaded water during the year.

Investors examining the tea leaves for clues regarding 2006 should be quite sanguine. Economic growth seems set to continue at a healthy pace next year and inflationary pressures are well contained.

Although short-term interest rates may be rising, the scale and pace of monetary tightening is likely to be measured and consequently, poses no threat to global economic growth.

Prospects for the Irish economy and equity market are exceptionally positive, with the added bonus of the coming onstream of SSIA funds, starting in May 2006.

Although it would be difficult for equity markets to replicate this year's buoyant returns, Investor believes those markets will deliver healthy returns in the coming year.