Brandy Auterson:
It’s now time for For Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Welcome back, David.
David Nelson:
Thank you, [inaudible 00:00:11]. Appreciate it.
Brandy Auterson:
Inflation remains a key theme this year in the economy and in markets. Could you share some of the recent numbers that has kept this top of mind for investors?
David Nelson:
Certainly is top of mind. That’s a good way to lay it out. Inflation’s a big, big item. We haven’t seen inflation like we’re talking about these days since 1990. This is a very significant item here. The consumer price index is probably the biggest one that you hear the media talking about as far as significance that it’s having, as far as on the average person’s pocketbook. What I did is I brought along a chart that I’d like to illustrate as far as to folks as far as a really important concept. I know it sounds maybe a little vague and what have you, and I don’t understand it, but just get the concept. The concept here is we’re looking at a couple different bonds. We’re looking at government bonds. One is a traditional type bond. The other one is going to be a bond that basically fluctuates a little bit as far as with inflation.
David Nelson:
These two, what we’re trying to do here is to measure as far as what is the bond market. What are we believing that interest rates and inflation are going to be as far as going forward? What this tool is basically showing us is a 3% number and the 3% number is looking at a 10 year or a five year rather government bond currently paying 1.23%. It’s looking at the five year tips, which is the other bond that we’re trying to match these up with. That’s showing -1.85. If we put them together, we’re looking at 3% inflation is the best call that we’re making today. When we look at this, again, as I reiterated earlier, we’re going back to the late nineties, as far as the last time that we’ve seen inflation similar to what we have today.
Brandy Auterson:
That’s crazy. What do these expectations mean for investors going forward?
David Nelson:
Yeah, I think rising inflation an rage havoc as far as uncertain financial assets. Probably the most obvious one would be the bond market. When we look at these decisions that we’re making, we’re trying to gauge it. Is it going to be higher than what the market is expecting? In other words, inflation being greater than 4%, or is it going to be less than 4%? If it ends up at 3% as is predicted now by the bond market, then you’re really not significant move as far as either direction. But if you believe that it’s going to be greater or you believe it’s going to be worse, you can really capitalize as far as on this, not just in the bond market, but also as far as with real estate, with commodities in particular are going to be a big, big beneficiary as far as this. And again, an opportunity for folks to take advantage of.
Brandy Auterson:
All right, David. Again, thanks for joining us.
David Nelson:
Thank you.
Brandy Auterson:
If you missed any of our discussion, we’ll make it available for you on ourquadcities.com.