Redrick Terry:
It is time now for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. David, welcome back.
David Nelson:
Thanks, Redrick. Good to see you again.
Redrick Terry:
Good to see you as well. Let’s talk about the stock market obviously coming a long way since it reached its low point back in March, but it seems like we continue to kind of get bombarded with bad news. Explain to us what exactly is going on here
David Nelson:
Yeah, I wish I knew exactly. That would be nice. But there is a disconnect that’s taken place here. And I brought along a slide to help visualize as far as what’s taken place. In this slide, if you look at the top clip, in the top clip, we’ve got blue and we’ve got red, and I’ll start with the blue. The blue is basically looking at as far as the unemployment claims, and what we’ve seen this year alone is a 1300% increase in jobless claims. Just numbing statistics. The red line, it’s a little different. It’s basically looking at layoff announcements. As I’m sure the viewers can see, is both of them are starting to tilt downward, which is certainly where we want to see it go.
David Nelson:
Now, on the bottom clip in yellow, what we have there is essentially the S&P 500. We’re using that as the index for the market. And if you look at the left, let’s just look at it year to date, on the left is, we’re starting at zero. The market went up roughly 5%. Then we had that huge drop off, which amounted to again about a 30% drop, but 35 from the all time top there. And now, it’s rallied back.
David Nelson:
And so the issue is, we had that hard fall and basically it’s gone straight up since. And the reason is why, and that’s what everybody’s trying to sort through. Does it make sense? Can we justify as far as what’s taking place here, and I think many people would argue that you can’t. And we can go to that in question two as well.
Redrick Terry:
Absolutely. So what do you think could be some of the factors behind that?
David Nelson:
The biggest item is the Federal Reserve. The Federal Reserve has come in with just enormous sums of money and they’re talking about an additional type of a stimulus, and that’s clearly been the biggest part, but also the large cap company stocks. The balance sheets were really strong going into this period of time, and subsequently, large cap stocks have done really well as far as from the bottom to where we currently are.
David Nelson:
Now, if you take the small cap stocks, now, these aren’t the mom and pop shots, these are small companies that are traded as far as on Wall Street. They struggle in comparison as far as the large cap up until as far as about the last week. Now, again, we look at it and say, “Why is this happening?” Stock markets look ahead. And we’re looking ahead a year, and bottom line looking ahead a year, things are starting to look a little better.
Redrick Terry:
We’re running low on time here, but what does all of this mean for people’s investments moving forward?
David Nelson:
Quickly, we’ve got two themes. And the first one is the big are going to get bigger, and that is certainly a play that people want to keep in the back of their mind as far as that that’s going to continue. Supply chains have changed forever, and so you’re going to see a lot of the supply chains come back to the United States and you’re going to see a tremendous amount of automation. So there are some ways to play this and individuals should be looking for those opportunities. They’re out there.
Redrick Terry:
Good to speak with you as always, David Nelson. Thanks for joining us today.
David Nelson:
Thank you, Redrick.
Redrick Terry:
And if you missed any of our discussion, we’ll make it available for you at OurQuadCities.com.