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 for the invite. Appreciate it.
Brandy Auterson-Hurst:
It seems like things are constantly changing when it comes to financial markets. How do you keep track of changes and things like interest rates, for example?
David Nelson:
It’s a real challenge, and it’s a good question, because again, more and more we’re hearing is the fed going to cut? Are they not going to cut? And if they do cut, how much are they going to cut? And then again, hoping, I think most people out there, as far as that are borrowing money at least, are hoping that interest rates, as they cut, interest rates on mortgages will come down proportionally. As I shared last week, that’s not necessarily always the case. The chart I brought along today is a little different slant. It’s looking at what we refer to as the yield curve, and it’s probably one of the best tools that we find, as far as to try to look at interest rates and where they’re going to go, what have you.
What we historically see is that the short end of the market, in other words like a 2-year bond or CDs maybe even a better example, when interest rates are fairly high there, historically, you see the long end even higher and vice versa. What we see, as far as in the blue line, that’s not necessarily the case. If you look at the blue line as it moves to the right, we see that things have gone up. We are in a period of inversion is what it’s called. Fancy term for that the long end is higher than the short end. Hopefully, we’re beyond that and the red line is illustrating more current times, and things seem to be falling more in line with a historical parallel between the two.
Brandy Auterson-Hurst:
Okay. How should investors think about this change?
David Nelson:
Well, the bond market isn’t just one bond. You need to understand as far as what part of the bond market you want to be in. Unfortunately, most individuals, they just generically think in terms of investing in bonds and that’s not a good way to do it.
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Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.