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 Brandi, appreciate it.
Brandy Auterson-Hurst:
So there’s been some talk about the Fed potentially cutting interest rates. Does that mean rates are going to go down soon?
David Nelson:
It’s a common misconception that a lot of folks have. This is very, very normal. When we chat with clients, they talk about interest rates and the impact. If the Fed were to cut that, this is going to be great as far as mortgage rates, but I got to be the bearer of bad news as far as today that it doesn’t line up exactly that way. The Fed controls the short end of the market and the market basically controls the long end of the market. And so I brought along I think a pretty neat slide. I think that will help visualize some of this.
On the left-hand side, what we’re looking at is the average. The blue is essentially what’s taken place as far as the Federal Reserve is concerned. And we’re looking at this data is going back to 1989 and what we’re looking at here is nine different examples of basically where interest rates were being cut. And what we see in the left is the average. What we see in the middle is basically what’s taken place as far as during periods of recession. And what’s interesting is during periods of recession that they do kind of line up somewhat similar.
So in other words, about a 2% cut by the Fed equates to about a percent to percent and a half as far as for the interest rates as far as the 10-year being kind of the benchmark as far as for mortgage rates and what have you. So it’s an interesting match up here. When we’re not in a recession, what we find, and that’s the far right and I’ll wrap it up with this, is that when interest rates are being cut, when we’re not in a recession essentially. And that’s kind of where we find ourselves today, bottom line, interest rates don’t drop very much.
Brandy Auterson-Hurst:
All right David, as always, thanks for joining us today.
David Nelson:
Thank you as well.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on ourquadcities.com.
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Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.