Equity And Bonds Returns The End Of A Golden Era Essay

Equity and Bonds Returns: The End of a Golden Era? Despite numerous periods of global financial excesses, and subsequent corrections, over the past 30 years, the returns on equities and bonds in the US and Europe have been considerably above their long-term averages. The outperformance has been most pronounced in long-dated government bonds. The average annual real return on these instruments between 1985 and 2014 was +5.0% in the US and +5.9% in Europe, compared to long-run returns of +1.7% and +1.6%, respectively. Meanwhile, the outperformance of equities between 1985 and 2014 was more modest. The average annual real return on US equities was +7.9%, compared to a long-run average of +6.5%, while these respective measures in Europe were +7.9% and +4.9%. Two major related factors can predominantly explain this golden period for both bonds and equities, namely the taming of inflation and the subsequent decline in interest rates to historic lows. Both inflation and interest rates are important inputs into valuation models for long dura tion assets, thereby implying that their respective influences on returns over the past 30 years have, therefore, been largely felt through changing valuations. Equity returns are, however, explained by other factors, including economic and corporate fundamentals, of varying complexity. Positive demographics, technological innovation, and global supply chains have also helped to contain costs, while the emergence of new markets, notably China,Show MoreRelatedEquity And Bond Returns : The End Of A Golden Era? Essay1779 Words   |  8 PagesEquity and Bond Returns: The End of a Golden Era? Despite numerous periods of global financial excesses, and subsequent corrections, over the past 30 years, the returns on equities and bonds in the US and Europe have been considerably above their long-term (100 year) averages. The outperformance has been most pronounced in long-dated government bonds. The average annual real return on these instruments between 1985 and 2014 was +5.0% in the US and +5.9% in Europe, compared to long-run returns ofRead MoreEssay on Money and Democracy’s Dilemma1588 Words   |  7 Pagesgroups to exercise substantial –even disproportionate- influence in American politics† (205). Those with the most money and deepest pockets have the greatest resources in order to provide favors to legislators. It is with this money and its power that bonds and relationships are created allowing a lobbyist to ask for favors. In turn, these favors result in legislation that benefits the interest group. â€Å"This creates serious problems in terms of representation. To the extent that elected officials listenRead MoreInvestment Banking Morgan Stanley5266 Words   |  22 Pagesthe Morgan Stanley will not disappear, and will be viable businesses. 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