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. Appreciate it.
Brandy Auterson-Hurst:
So with the market becoming a bit more volatile these days, do you think investors should be worried about a possible crash?
David Nelson:
Well, yeah, the headlines clearly, the big swings that we’re seeing, it’s understandable that people are a little uptight. It’s times like this that one of the tools that we look to is what’s called the VIX index. And the blue line that I have in the chart that I brought along with me today, I think, will give individuals a pretty good idea as far as what we’re talking about here. We see a couple of big spikes that take place there, and this VIX index is like a fear gauge used by Wall Street in a pretty significant way.
What you see with the two of the top in blue, pretty severe upticks, and then it falls off pretty quick. However, on the far right is what we’re looking at as far as in current times, and this has been a more steady, more predictable type move that’s taken place. So it’s not the panic that we’ve seen as far as in the prior two that we’re illustrating here.
On the bottom, we’ve got, in red, this is called the skew index. And the skew index is basically looking at how people are hedging their investments. Are they hedging in a significant way, or are they not? And what we see here is that in prior examples, the two on the left, it was pretty dramatic as well, where on the right, it’s not as dramatic. So point being, I don’t think we’re looking at anything that’s short-term, that things are going to come unglued, but these are clearly telling us that people are nervous.
Brandy Auterson-Hurst:
So what should investors focus on moving forward?
David Nelson:
Well, the indexes are not telling us that there’s going to be an imminent crash, but they’re not confirming that it’s all clear. So be cautious.
Brandy Auterson-Hurst:
All right. David, as always, thanks for your insight today.
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.