Household Debt and Delta Cases Soar

As the Delta variant spreads more aggressively than the original infection, America’s reaction consists of more separation- vaccinated from unvaccinated. The surge is happening among the unvaccinated accompanied by a low rate of breakthrough cases in the vaccinated. Our political leaders are hesitant to declare mask mandates because Americans thought and acted like the pandemic had ended. Even Dr. Fauci says there is no need for mandatory mask wearing. One hope is that the news and spread of Delta will cause more Americans to become vaccinated. Unlike with the original infection where the only protection was serious behavior change- social distancing, hand washing and masking- we now have a protective tool that only requires one behavior, getting vaccinated. That is easier than the 3 original behavior changes! Although with the prospect of breakthrough cases, the most compliant will likely still be hesitant to shed the mask despite being vaccinated until the spread cools down.  

The impact on the economy of Delta will be clearer going forward. 2nd quarter GDP growth was lower than expected but Delta still had not impacted the economy by the time of the tally. 10 year US Treasury rates continue to fall to new annual lows with mortgage rates hovering near record lows. Unfortunately, this is not making it easier for Americans to purchase homes, especially first time buyers in a heated market.  

 

US household debt soars in 2nd quarter to $15T

Second quarter household debt increased by 2.1%.Part of the problem is caused by mortgage forbearance programs implemented by the Federal government in response to Covid-19. What will happen to these borrowers once protective programs end? The current eviction crisis might be a clue to some concerns going forward. At the last minute, Congress put pressure on the Biden administration and then the CDC extended the moratorium. Once again, this crisis points to inequality and the reality of “winners” and “losers” not only during the past 20-30 years but in particular the winners and losers during the pandemic.

Wall Street has been buying up single family suburban homes since the financial/mortgage meltdown in 2009. This trend continues as millennials find owning homes both more expensive and less important.  

Institutional buyers have flocked to purchase homes and have packaged them to sell to investors as well as taking some of these companies public.  

 

Investors saved $357B over the past 25 years by using index funds instead of active stock managers.

Index mutual fund fees averaged .17% while active managed mutual fund fees cost .95%. The difference over 25 years amounts to the $357B savings. Currently, we have index Exchange Traded Funds that have lowered the average expense ratio to less than half of index mutual funds. Those savings go directly into investors’ pockets, and more importantly for SAS investment management clients, they go to your portfolio gains. 

 

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