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Announcer:
4 Your Money is brought to you by Nelson Corp. Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by David Nelson, CEO of Nelson Corp. Wealth Management. Welcome back, David.
David Nelson:
Thank you, Brandy.
Brandy Auterson-Hurst:
So there is a growing concern regarding the debt ceiling in the US. Is this causing problems anywhere in financial markets?
David Nelson:
Crazy, isn’t it as far as we’re having this conversation. The answer is yes, it’s definitely an issue as far as that we’re dealing with. The good news is that it’s been pretty concentrated to specific areas. The stock market has been pretty much ignoring this issue but the impact that we’re really seeing is in the short term treasury area. So our chart that I brought along today shows the past three years of a one month T-bill, that’s in blue, and then we have the three month T-bill, that’s in yellow, and the effect of funds rate, that’s in red. Now, if you look closely you can see that the one month T-bill, that’s the blue line again, tracks the Fed’s fund rate, which is red, pretty much in real time. The three month T-bill historically is leading and trying to anticipate where interest rates are going to go so it can veer off the path to some degree. But, for a while, there’s been a two point spread between that one month and three month T-bills, which is just unheard of. It’s an incredible statistic to look at today as far as the difference.
Brandy Auterson-Hurst:
So are there any actions viewers should be taking to address these issues?
David Nelson:
Yeah, there’s been a massive rush as far as to get into money markets because you’re seeing interest rates in the four to 5% range. Compared to CDs and money markets, that’s a pretty big gap, but be careful as far as all money market accounts aren’t exactly the same. Some are safer than others so do your due diligence prior to investing.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on our quadcities.com.