Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly registered representative Securities offered through Cambridge Investment Research Incorporated, a broker, dealer member of Finra, SIPC, investment advisor representative, Cambridge Investment Research Advisors, incorporated. A registered investment advisor, Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s financial focus program.
Gary Determan:
Well, Dave Nelson joining us not in studio, we’re doing this by phone. Dave, how’s the voice?
David Nelson:
The voice is suspect, Gary.
Gary Determan:
Okay.
David Nelson:
I don’t know what’s going on. Last week or so, it’s just kind of steadily gotten worse, but feel great. I mean, I know a lot of people are fighting stuff and whatever, but mine is just the voice has kind of disappeared on me here. But no, I’m doing great. I appreciate and people, again, out there, it’s me, real deal, but it doesn’t sound like it.
Gary Determan:
Okay, so we’ll get right to business. And again, we’ll just only keep you around for about 10 minutes and let you go.
David Nelson:
Yeah, yeah.
Gary Determan:
So January wasn’t too bad of a month?
David Nelson:
Yeah, we’ve got a lot of things working for us these days. I mean, I think probably the biggest shocker, Gary, to most individuals out there is they hear the Federal Reserve is still looking at increasing interest rates to try to control inflation, and knowing that, people are a little gun shy as far as potentially looking at putting any money to work, what have you. But an interesting stat that I think is really an important point that people need to be aware of, one is that everybody knows that the Fed is going to increase interest rates to some degree as far as from here, probably 25 to 50 basis points and then hopefully will be done. But the staff that is important is October. If you look at a 10-year bond, and as I’ve always discussed as far as on this program, is that if there’s a discrepancy between the stock market and the bond market, always default to what the bond market is telling you.
And what the bond market is essentially saying today is October of last year, the 10-year government bond was four and a half percent. Today it’s down three quarters a percent from that high. And so that’s very significant when you talk about bonds, but it’s also very significant and I think that’s why we’ve seen the rally that we’ve seen, as far as pertaining to the stock market. The stock market for those that have been paying that close attention to it, is really rallied hard. And more specifically, it’s rallied hard outside the United States. And if you look at Europe, you look at Asia as a whole, most of them are up eight to 10% already this year. I mean, we’re just a month into the year. So if we look at all of the triggers, I mean, there’s various patterns that have historically taken place. We talked about the Santa Claus rally. There’s another one that’s the first five days of the new year, oftentimes was a good indicator as far as what the year’s going to hold.
Another one is 30 days, but we passed that as well. So if we look at what’s out there, and I’m not saying again, I would rush in and take every dollar that you have and pour it into the market, but it’s been a long time that since people that have been listing have heard me say some positive things about investing. And I think we’re kind of close, Gary, as far as we’ve been adding money, for whatever it’s worth, share with folks out there. We’ve been adding money fairly consistently the last probably two weeks. And we think that, again, just like outdoors the sun is shining, we think there’s starting to be some sun shining relating to the investment world that’s really, really been punished. Again, everybody’s probably aware of this. Stocks last year, 20 to 30% drop, bonds just got clobbered last year, the worst year ever for the bond market. In real estate, publicly traded real estate got roughed up as well.
So you put it all together. It was a really tough year for individuals, and it’s nice to have a little good news, as far as I think, to share with folks. Volatility’s going to stay with us, but I think what we’re heading towards is a movement upward as far as in the year 2023. Don’t get me wrong, there’s going to be volatility. And if we’re right, there’s going to be a lot of volatility in the backside of this year, but right now it’s looking like the sun is shining a little bit on the stock market.
Gary Determan:
Well, that is good to hear, and I’m always amazed how you have to deal with the ups and downs and try and figure out for your clients what is best for them.
David Nelson:
It’s a challenge, to say the least, in every situation. Every client is different as far as what they’re trying to accomplish as far as, again, looking at their time rise and looking at their risk level. And again, as I share with people all the time, if we ask you what type of risk-taker you are, and let’s say the stock market had been up big for two or three years in a row, my guess is people probably answer that they’re a little more aggressive than really, they normally would be. Contrast that to the stock market’s been clobbered, they’ve lost a whole bunch of money and yes, that same question again, they probably say, “What, are you stupid or something? I want to bury it in the backyard.” And so again, both are probably at the wrong time. So one of the greatest challenges that we have is trying to help people make that decision and that decision should be made with their noggin, not with her gut.
And most decisions that you and I make in a given day have to do with the gut, just how we feel about stuff. But when it comes to money, it’s really crucial that people use their head and try to make those decisions. So that part of it is really, really tough. The other part, as far as which is what you referenced, as far as the markets are concerned, is we have some expensive tools that really are helpful. They’re not perfect. None of these things are, as I tell clients, we have basically six just different decision making tools that we use. These tools are very, very expensive. These tools are right more than they’re wrong, but they all have warts. And so the key to it is, again, stepping back from that when times don’t feel good is usually the time that you want to be investing and vice versa.
And so these tools take a lot of that emotion out of it, not just for the clients, but also for us because again, we’re human beings. We look at it, “Oh my goodness,” you know, “how bad can this thing get?” Et cetera, et cetera. And so that sometimes can get in the way too. So we really lean on these tools heavily. They’re not the only part of the decision. Obviously we have to intervene and make some decisions as far as ourself, but we use these to lean on as far as to get us leaning, hopefully, in the right direction as far as trying to make these decisions. And then again, comes back to all stocks are at the same. This year’s a perfect example. The last 10 years, if you would’ve had money in emerging markets, which kind of were intriguing to people years ago, the last 10 years, you pretty much, and I’m not exaggerating here, you broke it even.
And that’s the extent of it. So you put in a buck 10 years ago, in emerging markets and today you have a buck, you haven’t made anything. Whereas in the United States, that return was magnificent the last 10 years. In Europe, in Japan, it wasn’t so good. So again, we’re looking at the facts, not emotionally looking at it, but the facts, and the facts are that the US has really outperformed the last 10, 12 years. We don’t think that’s going to continue. We do believe that you want to have exposure in the US and we do believe that other parts of the market are probably going to do better than others, meaning in our opinions, all caps probably going to outperform large cap, which is dominated, again, the last 10 years. We also believe that Europe, Japan, emerging markets, if we were to look over the next five to 10 years, is probably, and again, none of us know for sure, but probably going to outperform the United States just because of the cost of what you’re buying.
When you buy a stock, you’re basically buying the future growth and the future earnings of that stock. And if you look at the United States as far as the cost of stocks, even though they’ve come down pretty significantly, they’re still expensive when we compare them to stocks around the globe. So again, it’s take the emotion out of it, let’s look at the facts. People want to make some money and where’s the best shot as far as making money, as far as going forward, and again, if I were a betting person and I’m not, but if I were, I would be saying, “Hey, if I could only put it into emerging markets or the US or I could only put it in the emerging markets or Europe, my decision would be outside the United States over the next five to 10 years.” I just think the potential there is going to be so much greater.
Gary Determan:
Seems like the voice is hanging in there pretty good. And you’ve covered a lot this morning for us, and we appreciate that. So in closing with you today, David, what would you like to pass along?
David Nelson:
I think people need to have a very frank discussion as far as with their advisor and those that have been playing heavy defense. As far as, and again, when I say that, hopefully everybody understands that, but the big picture, they’ve been leaning on and putting more money as far as into the conservative stuff versus into the stock market, if you will. I guess I would wrap it up saying, I think you should have a conversation with your people. I think you should diversify and probably get more exposure overseas. But again, all of this is very specific to your individual situation. And again, from our standpoint, big picture, the opportunities are out there and they’re starting to materialize. We’re seeing green shoots a lot of different places, and that’s, I think, going to be good news. Volatility will stay, folks. It’s not going to be a straight line up, but I think if you look at it and you put a few dollars to work, I think six months a year down the road, you’re going to be pretty happy that you did.
Gary Determan:
All right. Well, great to hear from you. Outstanding show. Again, just a wealth of information at Nelson Corp. Wealth Management. You take care of yourself. I know you’re feeling great. Take care.
David Nelson:
Yes, I am.
Gary Determan:
Take care of that voice. Okay.
David Nelson:
Yes, I will. Thank you Gary.
Gary Determan:
Thank you so much.
David Nelson:
Have a great day.
Gary Determan:
Yes.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered Representative Securities offered through Cambridge Investment Research Incorporated, a broker dealer member of Finra, SIPC. Investment advisor representative Cambridge Investment Research Advisors, incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.