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Redrick Terry:
4 Your Money time, we’re joined by David Nelson, CEO of NelsonCorp Wealth Management. David, welcome back.
David Nelson:
Thank you. I appreciate it. Always excited to be here.
Redrick Terry:
Of course, we’re excited when you’re here as well. So given the recent experiences that we’ve had with markets and the economy and all that [inaudible 00:00:17] that’s out there, how do you help clients make sense of all of it?
David Nelson:
So it’s all about managing expectations, what are people expecting versus what’s probably realistic as far as going forward? I think up until a few weeks ago, people were just all giddy, markets were accelerating rapidly as far as the stock market, the bond market was accelerating rapidly as well. We had the inversion that took place back in August 14th where the longterm bond went below the short term bond. Very rare event. Generally speaking, not a very good type up event that we want to take place.
David Nelson:
So again, it’s managing those expectations, it’s trying to help people be realistic at where we are as far as in the cycle. This chart that I have here kind of summarizes this thing beautifully. Again, for those that are out there, I’ll try to give you the visual. There are 12 month rolling returns as far as looking at stocks and what we have is a huge gap when there’s no recession here and when there’s a recession, which again happens on average every six to seven years. But the average rate of return as far as on the upside is significant. We’re talking about north of 20% and when things are in a recession, bottom line, we’re talking about negative rates of return.
David Nelson:
So it’s really, again, we spend a lot of time trying to figure out are we going into a recession or aren’t we, because this is the the reason we’re talking about significant different returns. Generally speaking, very good. Generally speaking, very bad as far as over here.
Redrick Terry:
Well, certainly, and I’m sure you get people coming to you looking for that straightforward answer.
David Nelson:
Exactly.
Redrick Terry:
Is it going to go up or is it going to go down? So how can this information help people make better investing decisions?
David Nelson:
Correct. So everybody wants black and white. It doesn’t exist in our world, unfortunately. What ends up taking place typically for individuals is that again, we have the short term buys as far as from the last several years. “It’s been great,” or, “This has been awful.” The key is to be able to separate from that and try to make informed decisions as far as going forward.
David Nelson:
Again, these charts basically are here to illustrate what’s taken place in the rear view mirror doesn’t mean that that’s what’s going to take place going forward. But generally speaking, it gives us somewhat of a hint of what might be taking place. So we got to be very cautious as far as in periods of time like now, this inversion may be a very big deal.
Redrick Terry:
All right, David, thanks so much. We appreciate you as always.
David Nelson:
Thank you, Redrick I appreciate it.
Redrick Terry:
And if you missed any part of our discussion, we’ll make it available to you on ourquadcities.com.
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