Determination Of The Stock Market And Bond -Myassignmenthelp.Com

Question: Discuss About The Determination Of The Stock Market And Bond Market? Answer: Introduction: The current study is based on the determination of the stock market and bond market with in depth analysis of return on investment and trends over the years. The study will be emphasising on the market return over the years along with the unpredictable factors such economic circumstances around the international market. Market Overview of shares and Bond: After the worst start to the year, the stock market has managed to attain a new height in the year 2016. All the key indexes have rebounded to records and have defied the projections (Deegan, 2013). The equity returns, particularly are difficult to forecast in the short run which is buffeted around the unpredictable factors such as economic situations both in the US and overseas market. Market returns on the stock and bond market over the next decades are anticipated to fall short of the historical averages as per the estimates laid down for the year 2017 by the market analyst. The seven year to year have declined in SP earnings of that is largely driven by the energy sector and bottomed out in the quarter 2 of the 2016 and third quarter of 2016 and witnessed a growth of earning per share of 2.75%. The main reason behind the lower anticipations for the market return is below the average inflation in spite of the increase in the expected inflation. Historically, lower amount of interest rates and lower growth in price to earnings (P/E) ratio is because of the expectations for long term economic growth (Weil et al., 2013). These are anticipated to act as long term pulls on return and yields. The reduced outlook follows an extended period of double digit return for some class of assets. Presently the cost of individual stock analysis is greater than the analysis of S7P of 500. Stock: Industry Ratios 2017 Financial Price to Earnings Ratio (P/E) 40.65 PEG Ratio 1.08 Price to Book Ratio 1.96 Dividend Payout Ratio 18.99% Dividend Yield 1.55% Return on Assets 1.09 Return on Equity -0.10% Profit Margin 21.77% As the Federal Reserves moves forward with slow and steady program of increasing the interest rates the bond market are sending the warning concerning the risk of advancing further. The differences between the yields on the government bonds at the different level of maturities have flattened since long term rates have been declining close to short (Williams, 2014). The spread between the yields on the two year and 30 year US treasury bonds have proven in past that to be a better inverse indicator of economic downturn that recently hit a 10 year low. The government bond market can be distorted by the international purchase that is triggered by the policy decision elsewhere. China, for instance have resumed stockpiling US treasuries that acts as the capital flight from the country reduced. It could be possible that the fall in the nominal yields demonstrates the predictions of falling inflation instead of trouble on the real side of the market (Henderson et al., 2015). The ten year inflation expectations have applied by the bond markets that have felled from 2.1 per cent in the month January to around 1.7 per cent. However, such distinction should not have significantly changed the policy implementation as far as the Federal government is concerned. Bond: Ratios 2017 Industry Ratios Financial Price to Earnings Ratio (P/E) 1.2 PEG Ratio 1.27 Price to Book Ratio 1.63 Dividend Payout Ratio 53.61% Dividend Yield 2.96 Return on Assets 1.92% Return on Equity 10.85 Profit Margin 18.39% Conclusion: To conclude with, it might the best time for the investors to review and consider resetting of long term financial goals to make sure that they are based on the projections grounded under the discipline method and not on historical averages. Reference List: Deegan, C. (2013).Financial accounting theory. McGraw-Hill Education Australia. Henderson, S., Peirson, G., Herbohn, K., Howieson, B. (2015).Issues in financial accounting. Pearson Higher Education AU. Weil, R. L., Schipper, K., Francis, J. (2013).Financial accounting: an introduction to concepts, methods and uses. Cengage Learning. Williams, J. (2014).Financial accounting. McGraw-Hill Higher Education.