Jim Niedelman:
It’s time for this edition of 4 Your Money. We’re joined once again by David Nelson of NelsonCorp Wealth Management. Great to see you, David.

David Nelson:
Thank you, Jim. Appreciate it.

Jim Niedelman:
So now over the last year or so, you talked about the biggest stocks making up an increasingly larger portion of the stock market. Given everything that we’ve seen this year with the coronavirus crisis and the stock market crash, has this trend changed at all?

David Nelson:
It’s interesting historically, in a period of time like now, what you see is a rotation that takes place, as far as that those things that have worked as far as in the rear view mirror, today aren’t going to be working. And historically that has meant value stocks. That’s meant small-cap stocks. Stuff that, again, hasn’t worked in recent times. That’s not the case this time. What we’ve found this time is that large-cap growth stocks, primarily technology and healthcare, are the real winners as far as that’s taking place today. Again, five years, this has been the trend. It continues to be the trend. Very unusual, but again, I wouldn’t fight it as far as if I was an individual out there. Technology has just really transformed things, in particular in periods of time like now where people aren’t able to go to work necessarily, and people are working from home. That technology is really kicking in and really showing value. Subsequently those stocks are performing very well.

Jim Niedelman:
Yeah. We are relying a lot on technology through all of this. What does this mean in terms of investments, is the strategy for this environment different than other points in time?

David Nelson:
Yeah, to me, and slide one that I brought along today is going to give people a nice visual as far as what’s actually taken place here. And what you see as far as in this graphic are a whole bunch of squiggly lines. We’re looking at 2020 from January to current. And what it’s showing here, it’s hard to see probably. So I’ll give you the visual. The bottom there, the blue line, is looking at energy. And if you look at energy year to date, it’s still down 38%. Even after the rally that stocks have had, it’s still down 38%. real estate is still suffering in a massive way. Real estate, again, if you listen to many of the big corporations, they’re questioning whether, when people go back to work, that they’re not going to need the amount of space as far as at their current location, that maybe people can work from home and they can cut out some of the square footage that they need.

David Nelson:
On the other hand, if you look at technology, technology as far as here today is actually plus numbers. Technology is up 1%, 2%, 3%, depending on what stock you look at. Now that doesn’t probably sound like much, but considering the peak-to-trough drop, in other words, the peak of the market as far as going back to February, we were up 5, 6%. The market dropped close to 40%. And the bottom line is that many of these stocks have recovered as far as they’ve gone back to almost their all-time highs. And again, this is telling us a lot, as far as going forward. Healthcare also has worked very well. That’s, I think, probably an obvious one just because of what we’re going through right now, but those two areas compared to the real estate and energy, there’s about a 40% spread between two sectors of the S&P 500 and the top sectors, as far as of the S&P 500. Very rare to see that type of divergence as far as between the two.

Jim Niedelman:
Do you think these dynamics are a permanent feature of the marker now, or do you see things changing in the future?

David Nelson:
That is really a difficult one, Jim. It’s a great question, and we have to say as far as depending on this virus, but I think again, from individuals that I speak with, as far as people that can work from home, I think you’re going to see a lot more of that. And I think many employers are going to take the safer bet and have people stay at home as long as they can. So if I were a betting person, I would say that things really have changed and probably won’t be reverting back as far as to the old norm for quite some time, if ever.

Jim Niedelman:
David Nelson of NelsonCorp Wealth Management. We certainly hope they do change to back to what we’re used to foreseeing in the future. Be well yourself, David.

David Nelson:
Thank you. You as well, Jim. Thank you.

Jim Niedelman:
If you missed any of our discussion, we have that available for you at ourquadcities.com.