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. I appreciate it.
Brandy Auterson-Hurst:
So last week we talked about rising interest rates and the reason behind their move. Do you see any ripple effects from these recent moves?
David Nelson:
Yeah, very much so. And we did focus on the ten-year government bond last week. We shared a term that people may be not familiar with, and that is term premium, which is essentially a way to try to gauge uncertainty in the bond market and what people should be paid, how they should be paid accordingly. Now we’re going to focus on this important thing and how it can spill over into corporate bonds and the stocks.
So the chart that I have today, I think is a really nice one where it’s illustrating the white line here in the middle of it is looking at the S&P. The blue line is looking at essentially when interest rates are going down and how it impacts as far as stocks. And the red line is looking at when interest rates are going up and how it affects stocks. What we see here is quite a gap as far as between them. Essentially you’re talking about give or take an 18% additional return that people have received. Historically, when interest rates are being cut, contrast that to the red line that people aren’t making the money as far as when interest rates are going up. So this is really, really important stuff. And again, going to impact people’s checkbooks and 401k statements accordingly based on where rates are going.
Brandy Auterson-Hurst:
Okay. So how should investors be thinking about this?
David Nelson:
I think staying diversified is really, really important. And be willing to adapt. I find that people can kind of dig their heels in certain things, beliefs that may or may not be in reality are going to take place. But clearly risk levels have gone up, as we discussed last week, and this week I’ll reinforce that interest rates going up is not a good thing for stocks.
Brandy Auterson-Hurst:
All right, David, as always, thanks for joining us.
David Nelson:
Thank you.
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.