Announcer:
For Your Money is brought to you by Nelson Corp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for For Your Money. We’re joined by John Nelson, financial advisor at Nelson Corp Wealth Management. Great to see you, John.
John Nelson:
Thanks for having me, Brandy.
Brandy Auterson-Hurst:
So generally higher interest rates have been good for banks, but lately that seems like it might not be true. Could you explain what’s going on here?
John Nelson:
Yeah, we’ve had a few notable big bank failures here recently and while I don’t think that’s a sign of a big trend or failures within the overall banking system, they are facing some dynamics that they haven’t seen in quite some time. What I have with me today, I’ve got a graphic that illustrates if we think back to the great financial crisis of 2008, 2009, that was more of a credit driven problem. Today is a rate driven problem and this chart here shows the total commercial bank deposits in the US over the last 10 years and what we see is a very consistent climb and until about 2020 and where we’re at now is more recently, deposits have been going the other way. We’re seeing outflows for a variety of reasons. Inflation has picked up, people are spending more, and they’re simply just more options for people to look at versus bank accounts that were paying zero for the last decade.
Brandy Auterson-Hurst:
Okay. So how could this impact viewers looking to allocate their investment dollars?
John Nelson:
Yeah, I think just being aware of other options, it was so low for so long. There are now plenty of other options, whether it’s short-term treasuries, money market accounts that are now paying something. I think investors should take a step back and maybe what has been in play for the last 12 to 14 years may not be quite as relevant as it once was, and to explore some of those options for the safe tight money that they may have within their portfolios.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on ourquadcities.com.