Jim Niedelman:
The stock market is slowly beginning to rebound from the coronavirus plunge, but with President Trump now extending national social distancing guidelines to the end of the month, there are concerns about what further impact this will have on the economy and on investments. David Nelson from NelsonCorp Wealth Management joins us by phone with more on what we could expect. Practicing social distancing this evening there.
David Nelson:
It sure is, isn’t it? Wish I was there with you Jim in the studio, but I got to do my part and fall in line, and do the right thing.
Jim Niedelman:
We understand. Let’s start a little about speaking about the impact these losses can have on investments and what areas have been hit the hardest.
David Nelson:
Sure. So clearly the impact as far as of the markets so far, we’re talking about as a general thumb, 30 to 40% that’s taken place. I brought along a nice graphic here. I think that’ll help illustrate and show people as far as the impact that this can have. And I want to bring people back just quickly to ’07, ’08, ’09 and in 2007, ’08 and ’09, the market dropped over 50%. So when we look at that in the chart that I have here, if you drop 50% you need to make a 100% just to get back to where you were.
David Nelson:
This go around the Dow, I think it peaked out so far and who knows what this has done around 37-38%. Translation, looking at this chart here, you’re going to have to make north of 60% just to get back to where you were. So it’s been very significant. As far as the hardest said, no question about it. Anybody traveling and things of that nature as far as hotels, the boats, the casinos, they’ve been really roughed up. And the top of the heap has certainly been energy. Energy companies, stock, what have you, are down North of 80% many of them even north of 90% so it’s been very significant.
Jim Niedelman:
Now we’ve heard you speak recently about the different types of bonds and how each are affected in times of stress. Have the feds moves made everything better? Do we move any way from here?
David Nelson:
Yeah, so the second graphic that I have that I want to illustrate and show folks. There’s four different clips here, so four different segments. If folks focus on the top one, and again, you don’t need to know all the details of it. But I want people to look at the far right and just look at how significant that line is going up. That’s very similar to what took place in ’07, ’08, ’09 when we had the last crisis.
David Nelson:
What that basically means is that interest rates as far as for bonds with the ability as far as to liquidate bonds is become almost impossible and specifically on the top line, we’re looking at the US investment grade corporate bonds. They’ve really been affected in a big, big way. Now the federal government stepped in and they basically flooded the bond market with cash.
David Nelson:
That’s helped out tremendously as far as most of the categories that I have on here. But specifically if you look at the corporate bond arena, it is freeing up and certainly this is welcome news as far as for individuals. So far so good as far as the bond market. Bond market typically leads to the stock market. We’re not saying by any means this is over. We’re saying people should still remain very cautious.
David Nelson:
Certainly as we saw in the first graphic, losses are hard to get back, so we don’t want people taking a big dive. So be careful in what you’re doing as always, and again, use that common sense part of the brain and I think that’ll help you make good decisions during this period of time.
Jim Niedelman:
David Nelson with NelsonCorp Wealth Management. We always appreciate your time, be safe and in case you missed any of this discussion, we have that for you on ourquadcities.com.