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Members of D.A. Davidson & Co.

At Least Households Are In Good Shape

"the financial health of the household sector of the US economy, is actually quite good.


...households' financial burdens, which are defined as monthly debt service payments as a percent of disposable income a robust measure of debt burdens since it compares a flow (debt payments) to a flow (income). By this measure, households' debt burdens are at historically low levels, and have been for a number of years. No sign here of excessive borrowing, as there was prior to the past three recessions. 


...[another] compares liabilities to assets, and by this measure household leverage is as low as it has been since the mid-1980s. 


...Household net worth has reached another all-time high: $109 trillion. This has been achieved primarily by increased savings and investments in both stocks and bonds. Home price appreciation has played only a minor role, since the value of households' real estate holdings has appreciated less than 20% since the housing price peak of 2006. At the same time, total debt has increased by only 10% since 2007. 


...the inflation-adjusted value of household net worth, which has also reached an all-time high. It's important to note that this measure of financial well-being has been increasing by about 3.6% per year for many decades. Recent gains are almost exactly in line with historical experience. Nothing unusual or unsustainable about this." 


(At least households are in good shape dated 06/21/2019 by Scott Grannis, Chief Economist at Western Asset Management from 1979-2007)


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