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 James Nelson, financial planner at NelsonCorp Wealth Management. Welcome back, James.
James Nelson:
Thanks, Brandy.
Brandy Auterson-Hurst:
So, these days there’s plenty of talk about economic sentiment. What indicators are you currently keeping an eye on?
James Nelson:
Yeah. There’s one area that’s kind of caught our eye here recently, and that’s the surge and risky borrowing in the bond market. And that’s the chart I brought along today. And the chart shows that the US companies have issued a record number, 986 billion in speculative or what’s considered junk debt this year. So, now, usually it’s far more expensive for companies to issue that kind of debt. It carries a higher interest rate and investors have to be compensated for that risk. But at the bottom of the chart, it shows the difference in interest rates between the risky bonds and the safer US treasuries. And that’s near a 14-year low. So, the bottom line is that the investors are very confident in the economy, they’re comfortable taking on this riskier debt, and companies have taken advantage of that and issued quite a bit of it here recently.
Brandy Auterson-Hurst:
So, moving forward, what does this mean for investors?
James Nelson:
From a contrarian point of view, this excessive optimism is usually not a great thing for stocks. However, because there’s only… the economic environment and the market action has been good, that it’s not as big of a concern as if those things weren’t working in our favor. So, the optimism is good. Investors are on board with what’s going on and the bond market’s certainly supporting that as well.
Brandy Auterson-Hurst:
All right, James. As always, thanks for joining us.
James Nelson:
Thanks, Brandy.
Brandy Auterson-Hurst:
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