Investing involves risk. Depending on the types of investments, there may be varying degrees of risk.
Investors should be prepared to bear loss, including total loss of principal.
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 James Nelson, financial advisor at NelsonCorp Wealth Management. Welcome back, James.
James Nelson:
Thanks, Brandy.
Brandy Auterson-Hurst:
It seems that a lot of recent economic data is painting a mixed picture. Could you share some of the latest things that you are looking at?
James Nelson:
Yeah, we’re definitely seeing both positive and negative signs almost everywhere. To us, it looks more like a neutral environment for risk assets. Based on some of the metrics that we watch, we have not seen a strong signal either direction. I’ve got a chart here that shows one of these metrics that we look at, and in the top clip of the chart, the blue line represents the yield on the Bloomberg High Yield Corporate Index, which is currently at 8%. The red line is the yield on 10 year US Treasury, currently at 3.4%. The yellow line there at the bottom clip shows the difference between those two. That’s the credit spread. So, it shows essentially how much the premium investor would require over the safe investment, like the US Treasury in order to take on that default risk.
Currently, while the credit spread is above where it bottomed in 2021, it is not yet spiked. In fact, it’s nearly exactly in line with a 25-year average, which is shown by the dotted yellow line at the bottom.
Brandy Auterson-Hurst:
Okay. What does this mean for viewers in terms of their investment accounts?
James Nelson:
Yeah, we talk a lot about the weight of the evidence, and the weight of the evidence is means that we don’t focus on just one data point. Currently, the weight of evidence isn’t providing a clear direction, so we want to wait and see and get a little bit more data, a little bit more information before we would make any major asset allocation changes.
Brandy Auterson-Hurst:
All right, James. As always, thanks for joining us.