Redrick Terry:
It is now time for 4 Your Money. We’re joined as always by David Nelson, CEO of NelsonCorp Wealth Management. David, welcome back.
David Nelson:
Thanks, Redrick, appreciate it.
Redrick Terry:
Absolutely. So obviously this past week, not a very good one for the stock market. For those who aren’t aware of what happened, could you give us a recap of what took place?
David Nelson:
Yeah, three minutes that we have, probably it’s going to be tough.
Redrick Terry:
Yeah.
David Nelson:
I’ll try to summarize best I can. We had a big, big down week last week. We had three days, 1,000 point move. Brought along a chart to show here as far as just visually, as far as this is looking at weekly moves and we’re going back just prior to the recession, the great recession back in 2008, 2009. What we see over here, we’ve highlighted as far as in pink to show it’s a give or take 12% drop as far as for the week. The next biggest move was back in ’08 prior to the things really coming unglued as far as back then.
David Nelson:
This is significant to say the very least. The top is showing the stock market. And again, we’ve had this nice move and bottom line at the tail end here we have this big drop off. So very significant.
Redrick Terry:
Absolutely. And so what does a decline of that magnitude mean for people?
David Nelson:
I think probably the biggest thing, and slide two will give us another little visual of it. We’re going back. We’re looking at various dates as far as where we’ve broken through as far as the level that we hit this go-round. This is significant. I mean, most individuals, it’s probably a wake-up call as far as the importance of diversification, the importance of hedging as far as their portfolios. Most individuals, we’ve been lulled to sleep as far as over the last eight, 10 years. Things have been pretty easy as far as markets going up.
David Nelson:
And so we got this little bump here and again, we rallied yesterday. We had a significant move yesterday. We were up give or take 5%. That’s big, but again, we’re telling people it’s not too late as far as to think in terms of building better diversification into your mix and number two, look at hedging, the importance of hedging my portfolio and having better diversification.
Redrick Terry:
I know this data can be scary and you definitely get a lot of data to inform your investing process. What is the data that you usually track, saying now.
David Nelson:
We look at three areas, big, significant areas. First is trend, and the trend clearly has been broken. This doesn’t look good as far as this is concerned. Sentiment, this is looking at the average person as far as what they’re thinking, what they’re doing. That’s been really optimistic, which is a bad sign as far as the market is concerned. Then we look at economic data, primarily the Federal Reserve as far as what are they doing. Are they accommodated? Are they looking at increased interest rates? Clearly, we’re in the decrease in interest rate mode. Interest rates last week, just to put things in perspective, dropped significantly. We almost touched 1% on a 10-year bond. You look a year ago, that was almost 2%.
David Nelson:
This is important stuff, and individuals need to be aware of it. Again, I would not rule out any significant drop as far as coming down the road. Overall, short term, not too bad. Midterm, longterm could be very, very rocky.
Redrick Terry:
Yeah, and we know you’ll be tracking it the whole way.
David Nelson:
Absolutely. Absolutely.
Redrick Terry:
David, thanks so much for joining us.
David Nelson:
Thank you, Redrick.
Redrick Terry:
I appreciate your being here. And if you missed any part of our discussion, we’ll make it available to you on our website ourquadcities.com.