Jim Niedelman:
It’s time once again for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Great to see you, David.
David Nelson:
Thank you, Jim. You as well.
Jim Niedelman:
So since the start of the turmoil this year in the financial markets, we’ve talked a lot about what the Federal Reserve’s been doing. Do you think the Reserve, the Fed has accomplished what it’s intended to do with the actions taken so far?
David Nelson:
As a whole, I think the answer is yes. They’ve been extremely busy as far as trying to stop the bleeding as far as what’s taken place. February, March, as people may remember was the start of the virus. And certainly that was a significant item. I brought along a chart here, the first chart that I brought. What I wanted to explain to try to answer your question was how dramatic things have actually been. If we look at this chart, the blue line is showing a real steep incline as far as in the March timeframe. The two-week period of time where we went from 3.3% on high quality corporate bonds to 5.2%, it was just a dramatic movement. Something we’ve never seen before. Then on March 23rd, where we’ve got the arrow for us on the chart, that’s when the fed announced what they were going to do moving forward trying to stabilize things. And we’ve seen interest rates steadily move down since. It’s immediate move and we’re back to pre-crisis level, which is just again, astounding as far as how rapidly both these moves transpired.
Jim Niedelman:
So obviously it’s a part of this magnitude can’t be relied on by the financial markets for an indefinite period of time. Given the importance of that involvement, though, what do things look like going forward from here?
David Nelson:
Well, I think the moves the Fed made have been extremely important. The liquidity came in the marketplace and we’ve seen risk assets Absolutely take off. Fancy way of saying investments like stocks. The stock market’s getting back very close to all-time highs depending on what index you look at. So the second chart that I brought, there’s a lot of lines here, but what I’m trying to illustrate is the hundreds of billions of dollars that the Fed has pumped into the system. Each one of those lines is representing a different part of the credit market that the Fed has pumped a lot of money into. So that’s the good news. The bad news is that these programs are expiring soon, and soon, looking at September as far as the Fed. Congress has also flooded the marketplace as far as with money. That too is expiring soon and that’s actually expiring a little earlier.
Jim Niedelman:
Well, certainly one thing that people care about, watch closely are their own retirement accounts. What’s the potential impact all of this and other investments if the Fed begins to withdraw that support.
David Nelson:
Yeah. So I think the market rate now, when we see it yesterday, we had a pretty significant move as far as up. I think that the market is becoming much more vulnerable because I think people are assuming that the Fed is going to continue down this path as well as Congress. So we’ve got to really weigh out the risk return at this point in time. And again, getting back to all-time highs or close to it, I would say that most individuals ought to start taking a little risk off the table and protect the money that they made over the last several months.
Jim Niedelman:
David Nelson, always great to get your analysis. Good to see you.
David Nelson:
Thank you, Jim.
Jim Niedelman:
And if you missed any of our discussion, we have that available for you on OurQuadCities.com.