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Redrick Terry: It’s now time for 4 Your Money. We’re joined by David Nelson, CEO of Nelson Corp Wealth Management. David, welcome back.
David Nelson: Thanks [Redrick]. Appreciate it.
Redrick Terry: Absolutely. We’re talking stock market this week. We’ve seen stocks get back to record territory after experiencing some pretty big losses at the end of 2018. So, is this something that people should be worried about at this point?
David Nelson: Uh, we always worry. (laughs)
Redrick Terry: (laughs)
David Nelson: So, should other people be worried? Um, you’d be concerned, you know. We’re hitting, uh, we’re, we’re hitting record highs again and, um, last year we had this, uh, significant pullback towards the end of the year. There was a 19.4%, I believe to be exact, uh, draw down last year.
But a lot of good things that have been happening. And the first chart that we have here, I’ll kind of illustrate. Um, we think this is a really important, um, um, tool that folks can pay attention to. And what we’re looking at here, is essentially a 200 day moving average, as far as looking at the average of the stock. And this particular index we’re looking at here is the All Cap World Index.
And, what we find is that when markets are above the 200 day moving average, generally speaking, you have, uh, uh, terrific returns. And, then when they fall below, this is generally where you see the most volatility. And, certainly during this particular window we’ve seen tremendous volatility as far as during this period of time. And, that’s generally when you have negative returns.
Now, it’s a simplistic concept but as a general thumb, uh, the 200 day moving average, you’re gonna find the bulk of the returns that are gonna come above. Almost all returns will come when it’s above. And, below you’re gonna have increased volatility.
Redrick Terry: Now, what are we looking at in terms of internationally speaking?
David Nelson: International, uh, uh. The slide two if we could look at that please. So we’ve got the S&P 500 here. What we just looked at is international, uh, returns. And what we find is that both, both of them have been running pretty much in sync from the standpoint of, uh, since the recovery’s taken place.
Both bottomed on December 24th and we’ve had this nice rally. But long story short, what we find is that, again, the US did roll over as quickly as the international markets did and subsequently were above, uh, those levels. And, uh, and, and this is, this is fun territory here and we hope to stay above the 200 day moving average.
Redrick Terry: Most certainly. So, what would your response be if somebody came to you and expressed their concerns that maybe the stocks are too expensive, or they thought there were other risks?
David Nelson: Fair- fairly common. As far as folks are very concerned these days, as far as, un- un- un-risk. Uh, ou- our response is always the same. If you have a disciplined approach, um, you can succeed. And, a disciplined approach using some of the technical analysis we just looked at can be a very, very useful tool, uh, again, helping individuals get to where they wanna get as far as protecting their money, trying to get the bulk of the upside, and trying to minimize the downside.
Redrick Terry: Absolute- the goal right there. Isn’t that right?
David Nelson: Absolutely.
Redrick Terry: David, thanks so much for joining us.
David Nelson: Thank you Redrick.
Redrick Terry: Of course. And if you missed any of our discussion, we’ll make it available for you on ourquadcities.com.
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