Jim Niedelman:
We are talking investments and money. Of course, that means For Your Money with David Nelson, with NelsonCorp Wealth Management. David, great to see you, as always.

David Nelson:
Thank you, Jim. You as well.

Jim Niedelman:
We spent a decent amount of time since last spring, talking about the volatility of financial markets. We saw a historic rally in stocks for quite a while. Volatility, now well off its peak, what can you tell us about the current volatility that we’re seeing?

David Nelson:
Well, as you say, the market has really done well over the last year or so, record highs, volatility’s dropped off. Looking forward is obviously what people are interested in and certainly probably the proxy that most people would look to, as far as to kind of gauge volatility, would be the VIX, V-I-X. It’s kind of a method of trying to gauge volatility. And we’ve got a chart that we’re going to share here in a second, it’ll kind of give people a feel as far as for the difference between what we call the implied versus the actual. And the applied versus the actual historically tied together fairly closely, but what we saw as far as a few months back was not necessarily that, but volatility is clearly down. And the number to remember as far as, as we go through this, is the number 20. 20 is kind of the benchmark. So if it’s above 20, historically volatility has been higher. If it’s below 20, then we’re talking about something as far as reduced level.

Jim Niedelman:
So what example can you share that shows how the market uses measures of volatility?

David Nelson:
Yeah. The chart that I have here, a lot of people, as far as again, that study investments, and again, are looking for opportunities are going to look at vehicles like this. Some of this stuff seems ridiculous to the average viewer out there. It really is important, otherwise we wouldn’t be going through it. But what this is showing here is that the two of them track fairly close. So the one is implied. It’s kind of trying to look into the future. The other, which is the blue, is actually looking at what’s taken place, and they typically fall pretty closely.

David Nelson:
But if you look back towards the beginning, the big spike, as far as on the left hand side, you can see there was a break there that took place, as far as between the two. That break can create, again, a good period of time, as far as to make investments. Now, what we’re looking at now is on the far right, which is basically showing that they’re pretty close. Historically, this isn’t necessarily a great opportunity, as far as it’s more of a headwind for risk assets than it would be a tailwind.

Jim Niedelman:
So let’s try to sum us up and put into some perspective for people at home. What can they take away from these insights?

David Nelson:
To me, one of the phrases we use a lot here is advance and protect. So I think we’re in one of those periods of time where we’ve seen this dice advance, we want to protect it. We tell people the importance of asset allocation, can’t be emphasized enough, and we’re in one of those periods now. And again, it’s great to make money, but it’s much better to keep it. So we want to be cautious during periods of time like now, not overly cautious, but we’ve had a big run, no sense of being silly right now and sticking our neck out any further than we need to.

Jim Niedelman:
David Nelson, with NelsonCorp Wealth Management, always giving us great stuff to think about. Thank you, David.

David Nelson:
Thank you, Jim.

Jim Niedelman:
Appreciate it. If you missed any of this discussion, we have that available for you online at ourquadcities.com.