Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Welcome back, David.
David Nelson:
Thanks. Appreciate it very much.
Brandy Auterson-Hurst:
So, David, we hear a lot about GDP and economic growth, but how does that actually tie into what happens in the stock market?
David Nelson:
Well, it’s a really important variable. It’s the gross domestic product. I think people hear the term and maybe they don’t understand it, but essentially what it is, it’s a broad measure of how fast the economy is growing. And a lot of people assume that if the economy isn’t in a recession, that the stock market should be doing fine. But the chart that I have today, it illustrates this pretty nicely. Hang with me here folks. As far as I’ll try to define it. On the left-hand side, we’re looking at the GDP numbers, and on the top right, we’re actually looking at the returns as far as that come along with it. So what’s interesting as far as I think most people is that the returns, as far as when we’re in recession, the returns really aren’t that bad. So again, that would be more of the left-hand side, towards the middle bottom.
What’s interesting is that leading into the recession, when the GDP is at 0.1 to two is the worst period of time that we find ourselves as far as stock market returns are concerned. So it’s kind of, I think for most people it doesn’t seem to make sense, but if you visualize it, essentially what we’re trying to illustrate is that going into the recession, typically people start getting nervous. They’re not spending money, what have you, and coming out of it is a really, really dynamic period of time as far as where stock market returns can really be really big.
Brandy Auterson-Hurst:
So what’s the message here for investors today?
David Nelson:
Well, again, we find ourselves in a weird period of time right now and the GDP projections have come down quite a bit. I would be very cautious at this point in time.
Brandy Auterson-Hurst:
All right, David, as always, thanks for joining us.
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.