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 a lot of talk on Wall Street about signals that can warn us of a recession before it happens. Is there one you actually pay attention to?
David Nelson:
Yeah, this one’s a little wonky, so everybody stick with me, but it’s pretty simple as far as once we kind of explain as far as how it breaks down. So this chart is illustrating multiple things here. Obviously, we’re trying to factor in as far as the treasuries, and we’re looking at a 10-year treasury yield, and we’re looking at a two-year treasury yield. And what we normally are going to see when the lines are above that yellow line in the middle there is that things are normal. Normal meaning that the long-term rates are higher than the short-term rates. Important, very important as far as the economy is concerned, as far as for that to take place.
Now, when it drops below, that means that now all of a sudden short-term rates are higher than long-term rates. And that’s where markets start getting nervous. And that’s generally a pretty good indicator, not to the day, not to the week, but a pretty good indicator as far as that there may be trouble ahead, and that being recessions.
And so it’s one of these items that, again, sounds boring, sounds like something that the average person may not care about, but again, this is material. This is going to mean good economy versus average or below average economy. And again, that can impact a lot of individuals as far as out there. So we kind of view it as kind of like a warning light on your car. When it comes on, it doesn’t tell you exactly what to do, but it gives you a warning that something bad’s going to happen. And the warning light right now is getting pretty close to giving us that sign. So be careful, folks.
Brandy Auterson-Hurst:
All right, David, thanks for your insight today.
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Indices mentioned are unmanaged and cannot be invested into directly.
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