Announcer:
For Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s time now for your money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management and welcome back David.
David Nelson:
Thanks, Brandy.
Brandy Auterson-Hurst:
So lately the stock market seems stable, but some investors are noticing a little more turbulence under the surface. What’s going on?
David Nelson:
Yeah, that’s a great question and it’s certainly the case. When we look at it as far as you said, as far as from an index perspective, what we see is not that much volatility, but when we look underneath and we look at the individual stocks themselves, we see quite a difference. I have a chart today that I brought along and it’s again, these colored lines, so hopefully help make this concept a little easier to understand. And what we’re looking at here is dispersion. It’s a really important point and that is we’re looking at the VIX, which is a method in a way to try to see the volatility and the anticipated volatility in the future as far as the index.
And the blue is looking at individual stocks themselves. And historically they’ve been pretty close, which again is I guess a pretty good sign as far as it is a very predictive type of approach to this. And what we see here at recent times on the far right there folks, is that they’ve moved considerably apart. So what seems to be a calm marketplace out there really underneath really isn’t, this hasn’t happened in quite a while. This happened back in 2018 and we had this calm and what have you for a period of time and then all of a sudden, pretty much things got ugly pretty quick. So it’s a time to be probably quite careful.
Brandy Auterson-Hurst:
Okay, so what does this mean for investors going forward?
David Nelson:
Well, as I mentioned, 2018 was the last time. And 2018, when we look at the period of time of this calm versus the bottom, when it ended up the drop stopping, it was a pretty dramatic drop. So our advice to folks is to know what you own and be conservative at this point in time.
Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.