Jim Neidelman:
It’s 4 Your Money time. We’re joined by John Nelson financial advisor with NelsonCorp Wealth Management. Always. Great to see you, John.
John Nelson:
Thank you for having me, Jim.
Jim Neidelman:
Now all year, we’ve been hitting on the reflation theme, discussing higher inflation and rising interest rates. Recently, these trends have come under pressure. What are your thoughts relating to those areas?
John Nelson:
Yeah, so we have. I remember doing a number of shows right here with you, David did as well, in the first quarter where inflation was picking up to a level that concerned a lot of people. A lot of headlines and pundents, we’re just waiting to see how far things would go. We’ve since seen some of that pressure relaxed, of course, there’s certain pockets if you happen to be in an area that’s still under pressure, it doesn’t feel like things have been relaxed. But broadly speaking across the market and across different sectors some of those big increases that we saw earlier this year have certainly slowed down. Interest rates too, a key component with that. Interest rates were rising fairly steadily just with how low we were, any increase with the upside were pretty significant, those have also slowed. So we’re seeing a more steadied effect on the markets currently. We’ll see if that holds through the second, third, fourth quarter this year but currently we’re not seeing quite the volatility that we once were.
Jim Neidelman:
What kind of example do you have of something you’re watching to gauge the impact of these dynamics?
John Nelson:
Yes. So the graphic I have with me today Jim is one that illustrates the yield from the S&P 500 with the 10 year treasury. So as we can see over the last five years from the left or right there, the 10 year treasury bond was paying a higher yield than the S&P 500. That’s pretty typical. That’s what you kind of would expect. You’re owning the bonds for the safety, the perceived security and the dividend or cashflow from those instruments. The equity markets, the S&P in the blue line there, is mainly you think in terms of growth, you’re trying to see some appreciation there. So what was consistent or normal for a period of time has sent shifted. The 10 year yield has come down. Investors are not getting quite what they once were. And S&P is pretty much matching that in terms of the yield you’re getting from those positions.
John Nelson:
So it is an interesting time. There’s been a big shift that we’ve seen firsthand working with investors and clients, the number of clients that were the safe, secure, CD type investors that have felt like they’ve had to migrate to more risky assets, just to try to get somewhat of a return, that’s the dynamics we’ve been in for a while. But we’re seeing more and more of those people reach out there on the risk spectrum just trying to eat out more of a return that they’ve seen in CDs, bonds, et cetera, that are just not paying what they once did. We can talk about the concerns with that, conservative investors now reaching to equities, there’s a lot of things that go into that, but that’s where we are today.
Jim Neidelman:
All right. So how can people at home watching use this information when it comes to their investments?
John Nelson:
Yeah, I would say we don’t see any significant interest rate movements from here. So at least a portion of assets that could make sense to take on a little bit more risk, but also just for those investors that are contemplating that, or have done that the dynamics are very different. A lot of times when you see people that, hey, I can get another percent here and they aren’t fully aware of the risk that they may be taken on, just understand, this is very different than the more conservative, fixed income type positions that they’ve oftentimes own. Now, what percentage, what portion of their money could make sense taking on a little bit more risk so that they are keeping up with inflation and that they have money later in retirement when inflation continues to eat at them.
Jim Neidelman:
John Nelson, NelsonCorp Wealth Management. Interesting things to consider as always John. Thanks.
John Nelson:
Thank you, Jim. Happy to be here.
Jim Neidelman:
In case you miss any of this conversation, we have that available for you online at ourquadcities.com.