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.
Brandy Auterson-Hurst:
So there’s been some talk lately about where the economy is heading. What signals do you think are most useful for investors right now?
David Nelson:
Yeah, there’s a ton of different options that are out there as far as different indicators, but the one clearly that we like as far as up and above everything else centers around interest rates and we’re looking at real yields, which is a fancy way of saying you take the current interest rate, you subtract inflation, that gives you that number.
The chart I brought along today is basically illustrating, again, here we get back to our yellow lines as far as making the separation as far as between real yields being positive versus below that line. They’re actually negative. Really important points, I guess, that I would want to emphasize here is that most of the time what you want to see is to be above that line. That’s typically a pretty good indicator as far as markets are concerned.
However, what we saw and see from this chart is after the crises in ’07, ’08, we basically were below zero for a period of time. We were close to zero and actually below zero for an extended period of time. And that’s typically the Federal Reserve was trying to hold rates down, which is hopefully going to stimulate the economy. Again, through time it’s actually worked, but at the end of the day, what we see today is probably what we want to see, and that is positive real returns.
Brandy Auterson-Hurst:
Okay. So what does that stronger backdrop mean for investors as they think about their portfolios?
David Nelson:
Well, the big picture, I guess I would say today is the positive real yields help create a healthier foundation as far as for the market, not only stocks, but also the bond market. So it’s a pretty good environment as far as from that standpoint.
Brandy Auterson-Hurst:
All right, David, as always, thanks for joining us today.
Past performance is no guarantee of future results. 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.