Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by James Nelson, financial planner at NelsonCorp Wealth Management. Welcome back, James.
James Nelson:
Thanks, Brandy.
Brandy Auterson-Hurst:
As we begin the new year, there seems to be wide-ranging expectations for financial markets. What are your thoughts when it comes to such broad possibilities?
James Nelson:
Yeah, you’re right. If you look at the big firms on Wall Street, their prediction for the S&P 500 do vary a lot. The range is from negative 8% all the way up to positive 20%. But as we know, these are forecasts and forecasts, people aren’t making decisions or shouldn’t be making decision off these forecasts. These are also the same firms that made the prediction that we would have a recession in 2023, and that never came about. They are forecasts. People need to keep that in mind.
For investors who have strong views on what’s going on or what the market looks like, they can slice and dice this by taking a peek at our next chart here. This chart, the blue line there shows the S&P 500. The red line there shows the high beta index, so that’s the highest sensitivity stocks inside the index. Then we’ve got the green line that shows the low volatility, and those are the lowest volatility price movements within the index. The movements here within these index show pretty much what’s expected that over the last five years as the market’s done well, the high beta is outperformed, the low volatility has underperformed.
Brandy Auterson-Hurst:
How can viewers use this data when it comes to their investment accounts?
James Nelson:
This tool’s an excellent way to kind of segment the market and it allows people to adjust their risk tolerance more aggressive or more conservative without giving up that stock exposure.
Brandy Auterson-Hurst:
All right, James. As always, thanks for joining us.
James Nelson:
Thank you, Brandy.
Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly. The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The S&P 500 High Beta Index is designed to measure the performance of the 100 constituents in the S&P 500® that are most sensitive to changes in market returns. S&P 500 Low Volatility Index is designed to measure the performance of the 100 least-volatile stocks in the S&P 500. Volatility is defined as the standard deviation of the security computed using the daily price returns over 252 trading days.