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:
Thank you very much.
Brandy Auterson-Hurst:
So the stock market feels very expensive right now. What are your thoughts on this?
David Nelson:
That is a good question and certainly one that we’ve been getting from a lot of folks out there. But, what we see when we look at the data is that there’s probably a reasonable justification as far as for the values that we have today, I would narrow that down to corporate profits. And one way to look at corporate profits, way to measure it, is you look at the percentage of the economy compared to the corporate profits. And it’s shown on the chart that I have here today, the blue line is going to walk you through as far as some of what we’re trying to accomplish here. And that is that if you go from the ’60s to the 1980s, these numbers, the percentage would be roughly 6% as far as the profits to the size of the economy.
Fast-forward to 2000, what we have is quite a significant shift and all of a sudden we’re now in the 10% range. And then fast-forward to just the last few years, all of a sudden we’re talking about a big increase again, it’s going to 11%. What’s driving this, I think, is certainly the technology and many of the largest companies today, especially in the tech space, are far more profitable than companies were in the past. And they’re operating globally as well. So you’ve got this global exposure in the sales as far as there, and subsequently you’re seeing a really, really nice increase.
Brandy Auterson-Hurst:
Okay, so what does this mean for investors?
David Nelson:
Well, I think it means, probably, I bring it down to one thing and that is the high stock prices aren’t just about hype, they’re being supported as far as today by real profits from these corporations.
Brandy Auterson-Hurst:
All right, David. As always, thanks for joining us.
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Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.