Brandy Auterson-Hurst:
4 Your Money is brought to you by NelsonCorp Wealth Management. 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. Appreciate it.
Brandy Auterson-Hurst:
So, David, interest rates and inflation are always a hot topic in the financial world. What are you seeing in regards to these two metrics right now?
David Nelson:
Well, it’s the one thing we really enjoy talking to people about and trying to point out, and that concept is real interest rates and fancy term, but basically what it means is that it’s looking at the rate that you get versus after you factor in inflation. Example would be just a 4% interest rate and 4% inflation, you’re netting zero, so that’s obviously not very good. Versus 4% interest if you’re in a 1% inflation environment. Obviously, there you’re netting out 3%. My chart today looks at this going back to 1990, and what we see over a 15-year period is real rates were negative, meaning savers were actually losing purchasing power over time due to inflation. It got really bad in 2022, as you can see, when real interest rates hit their lowest point in nearly three decades. But then things really started to change in 2023, and rates rose, and inflation fell, and real rates have been positive ever since. In fact, it’s the longest stretch that we’ve seen since the 1990s.
Brandy Auterson-Hurst:
Okay. So what does this mean for investors? Is this good news or something to worry about?
David Nelson:
Well, as a general thumb, this is going to be very positive as far as for investors as well as savers as far as the positive real returns. And again, we don’t know how long it’s going to last. History says that we’re probably going to see real positive interest rates for some time, and that’s certainly what we’re hoping for.
Brandy Auterson-Hurst:
All right. As always, thanks for joining us, David.
David Nelson:
Thank you.