Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Welcome back David.
David Nelson:
Thanks Brandy. Appreciate it.
Brandy Auterson-Hurst:
So ever since the Fed cut rates in September, stocks have climbed while bonds have dipped. So what’s going on here?
David Nelson:
Kind of a crazy times, isn’t it? Historically, if we look back in the history books, there’s been times that stocks and bonds move together, but then there’s other times that they move in opposite directions and the concept that we’re going to talk a little bit about today is called correlation and how they move in sync or don’t move in sync. And so the correlations we’re looking at today on the chart that I have basically is looking at 30-day periods as far as to try to draw these conclusions. If you look on the left, what you see there is basically 2018 through ’20 and the correlations in stocks and bonds was negative during that period, meaning that when stocks went up, bonds went down and vice versa.
But since then, what we’ve seen as far as in the right-hand side here is the correlations have been all over the place. Historically, when people think of correlations, they think of negative correlations where again stocks go up and bonds go down and they’re a buffer as far as to each other, but clearly what we’re seeing right now is just kind of a bizarre period of time to say the very least.
Brandy Auterson-Hurst:
Yeah. So what does this mean for bonds going forward?
David Nelson:
Well that’s the big question that I think people need to be thinking in terms of and that is is it worth having a diversified portfolio? History says yes. We’re clearly in the camp of yes, but people can question during certain periods of time that, “I’m really not getting that much benefit. As stocks go down, my bonds have gone down as well and so am I really getting any benefit from it?” But our advice for most individuals out there is have a balanced portfolio.
Brandy Auterson-Hurst:
All right, David. As always, thanks for joining us.
David Nelson:
Thank you.
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Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.