Announcer:
For Your Money is brought to you by Nelson Corp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for For Your Money. We’re joined by David Nelson, CEO of Nelson Corp Wealth Management. Welcome back, David.
David Nelson:
Thank you and happy New Year to you.
Brandy Auterson-Hurst:
Happy New Year to you as well. So what is the big theme you’re seeing in financial markets as we kick off the new year?
David Nelson:
Clearly there’s one item and one item only that people are focused on in the investing world and that is interest rates. It’s been really interesting to see the Fed started cutting interest rates in September and the 10-year bond since the Fed started cutting, has gone from 3.6 to 4.6. It’s moving the wrong direction. Obviously this has big impact as far as on households out there. The chart that I brought along today I think will be a great visual as far as letting people see. I think it’s really interesting as far as the major driver behind this is on the bottom of that. The top is the 10-year. The bottom is the really important element that I want folks to understand and that’s what’s called the term premium. And the term premium is in essence a measurement by the bond market as far as trying to justify interest rates.And higher interest rates basically equate to people want to be paid more for the risk that they’re taking, owning these particular securities. So it’s more on the long end than the short end. The short end, the fed’s controlling the midterm. And the long end, the markets are controlling. And the term premium is telling us that people are a little nervous right now.
Brandy Auterson-Hurst:
Okay, so what does this mean for investors?
David Nelson:
Well, I think for most individuals out there, they need to be well aware as far as that the mortgage rates, corporate rates, all of the things that are tied to the 10-year government bond are up and probably’ll stay up. People need to be flexible. They need to pay attention today because, again, this is basically indicating more risk.
Brandy Auterson-Hurst:
All right, David, some great advice there. As always, thanks for joining us.
David Nelson:
Thank you.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on ourquadcities.com.
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.