Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member FINRA, SIPC, investment advisor representative, Cambridge Investment Research Advisors Incorporated. A registered investment advisor, Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus program.
Nate Kreinbrink:
Good morning and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. Well, this is Nate. I got James joining me again today. A little dreary out there today. Again, I know we’re looking back over Friday, Saturday, and even Sunday or whatever. The nice spring temperatures and being outside and playing, a little bit back to reality for this time of year again now.
James Nelson:
Yeah, exactly. Nice to have the decent temperatures this past week, and hopefully they come back before too long. Fun time of year with basketball going on, baseball’s coming, pretty fun if you’re a sports fan, but our Big 10 let us down Nate.
Nate Kreinbrink:
I know, yeah.
James Nelson:
We only got one team left.
Nate Kreinbrink:
They do, and disappointing to go let …although I did see yesterday that the Iowa Hawkeyes and the Iowa State Cyclones women’s basketball team did advance to the Sweet 16, so hopefully-
James Nelson:
Good.
Nate Kreinbrink:
… that’ll be the allegiance to have them kind of continuing on, but yes, the… Yeah, March madness was definitely a lot of madness if you’re a Big 10 fan this year-
James Nelson:
No kidding.
Nate Kreinbrink:
… and then what those going on, but that’s why they play the games, upsets, Cinderella stories, it’s what makes that tournament truly amazing every single year and following some of those stories. So it just hits a little harder when it maybe hits your team a little.
James Nelson:
Yeah. Our teams a little bit, but still fun to watch.
Nate Kreinbrink:
Fun to watch, transitioning into baseball season. I know regular season kicks off here, I think, a week or so, or very shortly, if not that time period, so again, transitioning into a lot of that. It’s fun and exciting, just hopefully that sunshine and warmer temperatures get here and decide to stay here, not just kind of come for a day or two and then leave for a while.
James Nelson:
No doubt.
Nate Kreinbrink:
We’ll take what we can get. We will take what we can get it. And that kind of transitions us into today’s program, and sometimes it seems with markets, for a while, I mean, everything was going great and then obviously we had pandemic of last year, we had interest rates of last year, we had election year of last year. There was a lot of topics over the past 12 months, or for the year of 2020 you could say, that kind of caused volatility in the markets.
Nate Kreinbrink:
And that volatility has obviously continued into 2021, led by a lot of different factors, but some of them just kind of started to rear their head again as far as creating that volatility and where things are going. And I know you had mentioned when we were talking on the way up as far as your last TV segment that you did regarding interest rates and how those have a big impact and where we see those headed. Maybe talk a little bit about some of that.
James Nelson:
Yeah, interest rates have probably been one of the biggest stories this year. Rates have been near zero for quite some time. The 10-year government bond, which is basically the benchmark that we look at, that most everybody looks at, has had a pretty significant move. It went from under 1% to 1.6, 1.7, something like that, in a pretty short amount of time. And that doesn’t sound like much, but that’s a significant move. When rates start under 1% and nearly go up 1%, that’s a substantial move, and that’s been the story so far.
James Nelson:
That was partially the story last year, but really the story this year and how that kind of affects the bond market, but also the stock market, people look at the tech sector, the Nasdaq specifically, and interest rates have a huge impact on how we value those companies.
James Nelson:
If somebody’s expectations are that interest rates are going to continue to go up, it’s probably likely to see that the Nasdaq, and the tech space specifically, probably continues to get hit. And the reason for that is the way that those companies are valued, has a lot to do with the way that interest rates move and move to the upside. Now, if somebody has the view that interest rates have kind of gone up enough and they’re going to level off. Maybe this is a decent buying opportunity for some of those spaces that have been beat up in the last month or so.
James Nelson:
On the flip side, when you look at a lot of these value companies, we call it kind of the boring stuff, the stuff that hasn’t gotten attention in quite some time, that’s financials, industrials, manufacturing, that type of stuff hasn’t gotten any play for quite some time. That’s starting to look more and more appealing by the day, and that’s kind of where our heads at and things that we’re kind of considering.
James Nelson:
So there’s kind of two schools of thought. I think it really comes back to what’s somebody’s view on where interest rates are going. If you think interest rates are going to continue to trend upward, probably going to hit those higher valuation companies, specifically the Nasdaq index, a lot of those companies are going to probably continue to get hit. And if your view is, “Hey, rates have gone up enough”, they’ve probably going to level off here in some time, maybe a decent buying opportunity on some of those possessions.
Nate Kreinbrink:
Right, and I think it just, a lot of those topics that you went over, growth for value, and then you start looking at different small cap, large cap, mid cap, U.S., international, these questions that people have as far as allocations, a lot of times individuals don’t even know. They say, “Well, I’ve got 75% in stocks and 25% in bonds”.
Nate Kreinbrink:
Well, not all stocks or equity funds are created equal, so again, understanding what it is you own, understanding what is really happening in the environment, and we always say, individuals in our office say, I mean, “Don’t fight the trend”. I mean, in looking at where things are and again, don’t try to recreate the wheel, and that if things are looking like it, take advantage of any opportunity that may be out there and understanding that there probably will be some volatility in any space that you own at any given time. It’s the nature of the beast and it’s going to happen.
Nate Kreinbrink:
But again, if we’re looking a little bit longer term out there and that space still looks relatively favorable, you may have to take a little volatility or whatever to continue to get that exposure. And again, looking at it from a long-term approach, and this comes into play a lot when it comes into individuals’ 401k plans and asking them how they’re invested, what they’re invested in, and the common answer is, “Well, I don’t know, it’s just in there, whatever it was when I first started it based off of my age”. And it’s probably a target date fund of some sorts and going into it.
Nate Kreinbrink:
So again, understanding some of these, understanding the funds that are available inside of your 401k because it’s different with every company, but looking at these opportunities, and again, if we’re talking about things that you’re like, “Well, I don’t know what the heck they’re even talking about with out there,” it’s probably time to sit down with someone and actually look at your allocations, look at your portfolio and see if you’re best equipped for the environment that we’re in.
Nate Kreinbrink:
Things are always constantly changing. We talked about it at the opening of the show with the weather. The only thing constant is change basically. With that, markets are the same way, and especially in the environment that we’re in with all the unknowns coming up, you need to be able to understand where your money is and maximize that. Especially if you’re getting closer to that retirement date or where you’re looking at.
James Nelson:
Yeah, you talk about the uncertainty in the stock market and not all positions are created equally. That goes for the bond market as well. There’s a lot of different types of bonds. It’s not just government bonds, there’s corporate bonds, there’s duration that we need to be concerned with, and I think that’s kind of been overlooked for a long time. Our industry specifically has kind of brainwashed people into thinking bonds are safe.
James Nelson:
They are safe when interest rates are going down or they stay level. When interest rates go up like we’ve experienced here recently, people could really get hit in a bond portfolio. They think they’re conservative, but those bonds can lose value as well, and that’s what we’ve seen so far year to date. I think the aggregate bond index is down somewhere between three and 4% in no time.
James Nelson:
And again, it’s a lot of information that’s come from our industry that stocks are risky and bonds are safe. That’s true in most cases, but in a rising interest rate environment like we kind of find ourself in right now, bonds can lose value. And I think that’s a real key too Nate, as far as you said people don’t always know exactly what they own in their 401k plans as far as the stocks. I think that goes for the bonds as well. They just kind of get overlooked, “Hey, it’s a pretty conservative holding and I don’t really need to worry about it”. Well, maybe now we do need to worry about it and really evaluate those positions as well.
Nate Kreinbrink:
Those so-called safe investments, right?
James Nelson:
Yeah, exactly.
Nate Kreinbrink:
Well, and again, I think it just goes back to a relative of time. I mean, and those individuals that are looking at bonds and consider them that stable value type of thing that, “Hey, it’s safer whatever”, are going back to times where bonds were paying four or 5% rate of interest at any given time.
Nate Kreinbrink:
So, “hey, I didn’t want to have any part of the stock market”. I’d go into a bond, a fixed income fund, something like that, and then have the guaranteed interest rate that comes along with that that’s paying out. It’s a lot different environment and we’re definitely not there anymore. So that’s where again, it’s just understanding times, understanding what it is you own, understanding how it’s impacted by some of the decisions that are made globally, Washington, wherever the case, it may be with it. So again, a lot of stuff to cover, but again, it’s understanding literally what it is that you own.
James Nelson:
Yeah, and I think the long and short of it is give us a call, let us know if you’ve got questions as far as your allocation. Bring in a 401k statement, bring in a retirement account statement, we’d be happy to sit down with you and let you know what you actually own and how the current environment could affect that allocation.
Nate Kreinbrink:
We’re out of time again James. Once again, appreciate you joining me today, but did want to mention real quick that NelsonCorp Wealth Management is wearing jeans for charity every Friday. This month we’ll be donated to the L’Arch of Clinton. As always James, appreciate your time.
James Nelson:
Absolutely.
Nate Kreinbrink:
Nate and James with NelsonCorp Wealth Management, bringing you this week’s Financial Focus. Thanks again for tuning in, and have a great rest of your week.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member FINRA, SIPC, investment advisor representative, Cambridge Investment Research Advisors Incorporated. A registered investment advisor, Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.