Redrick Terry:
It is now time for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. David, welcome back.
David Nelson:
Thank you, [Redrick 00:00:10]. Appreciate it.
Redrick Terry:
Absolutely. The stock market doesn’t really seem to have gone much of anywhere for the past month or so. After that wild year it had in 2020, what do you make of this?
David Nelson:
Yeah. It’s kind of weird, isn’t it? Well, last year, 2020, things were pretty violent both directions, but clearly finished the year up significantly. The Dow, which, again, is the proxy a lot of people looked to, that was north of 10% last year. However, the NASDAQ, which is more technology, that was north of 20% as far as last year. So, coming off of that type of move this year seems kind of lame. Reality, it’s been a decent year as far as start to the year. Generally speaking, you’re not getting mid double digits. You’re getting a high single-digit type returns.
David Nelson:
Now, the volatility, as I discussed last week has come down. We were getting used to 1% and 2% moves daily. That’s very unusual as far as for the market. So, we’re, I think, going to settle into lower levels with this. The canal issue, as far as with the boat blocking the world economy, this is significant, but I think it’s a one-off type event. We just had yesterday, literally yesterday, a blow up as far as of the hedge funds, so that’s going to create some short-term volatility. But as a whole, things have calmed down and calmed down pretty significantly as far as over last, probably, month or so.
Redrick Terry:
Is this tug-of-war dynamic unusual in markets?
David Nelson:
The big thing, as far as when we look at… I brought along a chart, Redrick. This chart is a great visual, and I’ll try to, again, simplify as best I can for folks, is that you’ve got primarily what are called growth stocks, which I guess I’ll generalize and say, it’s technology, to try to simplify things. And then, you’ve got other, which would be energy, financial companies, consumer staples, that type of stuff. And we’ll call that stuff value. And generally speaking, what historically has taken place and what this visual is showing is that when you’ve had one up, the other’s been down. And that’s really rare, Redrick. Generally speaking, when you have markets moving up, maybe you’ll have technology moving up 1% for the day, and then, the other stacks will be up a quarter percent for the day.
David Nelson:
But this year, what we’ve experienced, and in particular, over the last month, give or take, is this rotation that’s taking place. And the rotation has basically led to if gross stocks are up for the day, value stocks are typically down. And again, that’s just really unusual. So, as the chart’s showing here, six out of the last 10 days, that’s the extremes that we had. Again, very unusual events.
Redrick Terry:
How might this impact people as they think about their own investment accounts?
David Nelson:
I think the big thing is it’s going to depend upon timeline and a person’s flexibility, as far as what they can and can’t do. If you have total control over your assets and in money, as far as 401k plans, and retirement plans, and things of that nature, you’ve got a lot of options. And I think one option that you definitely want to have on the front burner is a rebalancing of your portfolio. In other words, gross stocks over the last 10 years have had this fantastic run, and value stocks really haven’t done much. The last month or so, they’ve started to really move the other direction. But it’s just been a month, give or take, that that’s taken place. So, that would be the first thing that I would do if I was an investor out there, and again, I’ve had a good run, I would be rebalancing, and again, taking a little out of growth and putting some more into value type stocks.
Redrick Terry:
We appreciate your knowledge as always, David. Thanks for being with us. Thank you, Redrick. And if you missed any part of our discussion, we will have it for you online ourquadcities.com.