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It’s now time for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Welcome back, David.
Thanks, Brandy. Appreciate it.
So the stock rally that started last fall, it’s gotten choppy recently. So what do you think market participants are thinking?
Yeah, I think the recession talk that made things bumpy last year, to say the least, it’s faded to some degree, but I think the market’s still struggling with that. We’re seeing up and down days, as you indicated, the choppiness. The turmoil last year was clearly derived from interest rates and interest rates going up. And the chart that I have today is, again, I always talk about this, a nice visual, hopefully people can stay with me on this. The bottom is looking at interest rates and the Fed fund rates. And what we notice is that, again, the line moves around quite a bit and if you look at the far right, it goes up pretty significantly, pretty fast. And that’s the Fed increasing interest rates the last year, year and a half.
On the top, we’re looking at essentially a measurement as far as the market, as far as trying to value as far as the market. And what you notice, if you look at the two, and we’ve got a couple arrows there pointing to them, is that when interest rates are low, so the blue line on the bottom when it’s pretty flat there, you see that the red line is looking nicely, it’s going up in the correct direction and vice versa. So again, very important when we look at valuation measurements, what does it basically mean when we have interest rates going up? Generally speaking, you’re going to see the top line moving in the opposite direction.
Okay. So what implications does this have for viewers’ investments?
Well, I think individuals shouldn’t play too much into this, it’s one variable. I know we talk about that a lot. But clearly the big question is the market is anticipating rates staying up. And if that happens, it could get a little bumpier.