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 much.
Brandy Auterson-Hurst:
So with everything going on in the world lately, the Iran conflict, trade tensions, questions about Fed independence, how is the bond market actually processing all of it?
David Nelson:
Bond market is really key. And as you said, there’s a lot of moving parts right now. And Wall Street, today, I guess is zeroing in primarily on a vehicle called the Treasury Breakeven Inflation Curve. My chart today, I think will give people a nice visual as far as… And what we’re looking at here is basically the difference between the 10-year breakeven inflation rate and the two-year break even inflation rate.
Basically, the difference when it’s inverted means that the short term fears are running hotter than the long term fears. And the market is spooked about inflation right now, but still believes it will eventually be resolved. We’ve seen this before. When Russia invaded Ukraine, the gap was a negative 1.95 that you see highlighted as far as on the chart there. And then also the tariff announcements, it was a negative 1.13%. The Iran conflict as well caused a similar inversion, but just like the prior ones, we see this reversing rather quickly.
Brandy Auterson-Hurst:
Okay. So, what’s the takeaway for viewers at home?
David Nelson:
Well, I think the big picture for them is that the bond markets still fundamentally trust the Fed to keep inflation under control over the long term. And again, that’s generally good news. If the bond market’s happy, typically that spills over as far as in the stock market. All
Brandy Auterson-Hurst:
Right, David, as always, thanks for joining us.
David Nelson:
Thank you.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on ourquadcities.com.
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