Question.2540 - The final project for this course is the creation of a market analysis report that analyzes various organized global and domestic exchange markets and compares and contrasts performance for different investment products. In this milestone, you will submit a draft of Risks and Returns (Section IV) of the final project. You will analyze the risks and returns of different investment instruments in the U.S. and non-U.S. markets you selected in Milestone One. You may find it helpful to use online brokerage aids or other tools (e.g., Yahoo! Finance, Bloomberg Business, TD Ameritrade) in conducting this analysis. Review stock, bond, mutual fund, and commodity performance and their movement over time in these markets. Your analysis should include dividend yields, capital gains, price relative to intrinsic values, and foreign exchange considerations, which were discussed in Module Four. Last, you will come to a conclusion about each market’s performance and assess risk versus return when comparing investment vehicles within the different markets. Specifically, the following critical elements must be addressed: IV. Risks and Returns. Use this section to analyze the risks and returns of different investment instruments in the U.S. and non-U.S. markets you selected. You may find it helpful to use online brokerage aids or other tools in conducting this analysis. Specifically, you should: A. Investment Instruments. Review stock, bond, mutual fund, and commodities performance in the two markets. Be sure to: 1. Analyze investment returns in each of the two markets, including dividend yields, capital gains, prices relative to intrinsic values, and foreign exchange considerations associated with each of the instruments. Use relevant indicators and visual displays to help present your findings. 2. Explain what your analysis of returns suggests about each market’s performance and how that might affect decisions on where to list. Justify your response. 3. Compare and contrast how the different types of instruments move in the two markets over time, explaining the significance of this information for decisions on where to list. Provide specific examples to support your answer. For example, have certain types of instruments historically performed better in one market over another? Have certain types of instruments yielded higher returns more quickly? 4. Assess the risks versus returns associated with the different types of investment instruments in the two markets. How might these trade- offs affect listing decisions? Support your response with specific examples. B. Interest and Inflation. Analyze how interest rates and inflation affect different investment instruments and investor decisions. Give specific examples from the two markets selected to support your answer. For example, how do inflation and interest rates affect stock, bond, and mutual fund returns in each market? How does that, in turn, affect business and individual short- and long-term investment planning? C. Taxation. Would tax policies in the two markets make one a better option for IPO listing than the other? Why or why not? Give specific examples.
Answer Below:
Table of Contents Investment Instrument 3 The United States of America 3 The United Kingdom 3 Performance of different types of instruments 4 Interest Rates and Inflation 5 Taxation 5 Comparison between the two markets 6 References 7 3 Investment Instrument The report will mainly consist of a detailed discussion comparing the stock markets of the United States of America and the United Kingdom. The United States of America Stocks: The United States stock market mainly has approximately 5000 indexes. The most polar stocks of the United States are Dow Jones Industrial Average, S&P 500 and Nasdaq composite. All the stocks of the US stock market are included in the Wilshire 5000. Bonds: The US stock market's three basic and most important bonds are US treasury, corporate and municipal bonds (Abbas and Wang, 2020). The US government mainly issues the treasury securities. Mutual Funds: Some of the famous mutual funds of the United States are Vanguard 500 Idx; Adm, SPDR S&P 500 ETF, Vanguard TSM Idx; Adm and Fidelity 500 index funds. Commodity Performance: Some of the best commodity stocks of the US stock market are Barrick gold corporation and Valero energy corporation, which is simply performing at their best at the current times. The United Kingdom Stocks: The best stocks of the United Kingdom currently are Unilever, Glaxo Smith and Barclays (Marjanovi?, Mihailovi? and Dimitrijevi?, 2021). Bonds: Some of the best treasury bonds of the United Kingdom are BIL- SPDR Barclays, SHY- shares, VGSH- Vanguard short term Treasury. Mutual Funds: The top mutual funds in the United Kingdom market are: MSCI, Invesco and BlackRock. 4 Commodity Performance: The best commodity performance is mainly provided by the machinery and the transport equipment in the United Kingdom with an export value of about 118 billion British pounds. Performance of different types of instruments The performance of the two main instruments are mainly to be discussed in this section which is: the stocks and the mutual funds: In the US stock exchange, the Dow Jones Industrial Average stocks currently remain at the record high position in the month of September 2021. The best performers of the Dow Jones Industrial Average were Goldman Sachs, Microsoft and American Express, with 56.8 per cent, 35.7 per cent and 37.3 per cent, respectively (Nasimi and Nasimi, 2020). As per the United Kingdom or London Stock Exchange, the best-performing stocks are Unilever which has a current market of 121.5 billion pounds with a current price at 3.939p. This stock is currently yielding a dividend of 3.78 per cent in the market. The value of the best mutual funds of the US stock market is Vanguard 500 Idx which is currently performing and has mainly earned a very popular as well as a reputable fund of the index in the US stock market. Apart from this, the best performing mutual fund in the UK market is MSCI, and h mutual fund mainly aims to provide better transparency for the financial markets and helps the investment market in the UK to make better decisions. Interest Rates and Inflation The most important thing that must be observed is that the US market has mainly reduced the interest rate by a particularly 1 percentage point and is currently standing at a 0.25 per cent rate as of August 2021 (Nikou, Mansourfar, Bagherzadeh, 2019). The interest rate of the USA mainly 5 influences the cost of borrowings, the return which is placed on the savings, and these components are very important for the purpose of investment. On the other hand, as of February 2021, the interest rate of the United Kingdom was 0.1 per cent. The inflation rate of the United States as of April 2021 is 4.2 per cent. On the other hand, the inflation rate of the United Kingdom is 1.51 per cent. Taxation The most important thing which must be mentioned in this report is that the taxation system of the USA is mainly based upon the levels of both state and federal aspects. The taxes mainly collected in the country range from sales tax, income tax, capital gains. It has been observed that the federal and the state taxes are mainly separate from each other, and both of them mainly have their own authority for charging the taxes. The federal authority mainly has no right for interfering with the taxation level of the state. Every state has its own taxation system. On the other hand, the rate of taxes which the UK government charges mainly ranges from property taxes, income taxes, taxes of the UK inheritances, and the country also charge the value-added taxes. Most of these are mainly progressive taxes. Progressive taxes are mainly charged to those who belong to the higher income level. Comparison between the two markets By comparing both the markets, it was found out that the market of the USA is much better than the United Kingdom. This is mainly because the USA is ranked second with 1.56 trillion dollars of exports, whereas the UK ranks 10th with 473 billion dollars. The GDP of the USA is 15.68 trillion dollars which are six times larger than the UK, which is 2.44 trillion dollars. Thus it can be concluded by saying that investing in the stock market of the USA would mainly be profitable for any individual when it is compared to the London Stock Exchange in the United Kingdom. 6 References Abbas, G. and Wang, S., 2020. Does macroeconomic uncertainty really matter in predicting stock market behavior? A comparative study on China and USA. China Finance Review International. Marjanovi?, M., Mihailovi?, I. and Dimitrijevi?, O., 2021. Interdependence of stock exchange indices from leading capital markets: USA, Germany and Japan Stock Market. Bizinfo (Blace), 12(1), pp.15-28. Nasimi, R.N. and Nasimi, A.N., 2020. Forecasting Stock Market Returns: An Empirical Investigation for United Kingdom. Nikou, M., Mansourfar, G. and Bagherzadeh, J., 2019. Stock price prediction using DEEP learning algorithm and its comparison with machine learning algorithms. Intelligent Systems in Accounting, Finance and Management, 26(4), pp.164-174.More Articles From Finance
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