The story > the numbers, plus personal debt, market valuations, savings rates, student loans, and the Florida housing market
The story > the numbers, plus personal debt, market valuations, savings rates, student loans, and the Florida housing market
The Sandbox Daily (6.21.2023)
Welcome, Sandbox friends.
Today’s Daily discusses:
what people really care about
personal debt burden
market valuations
Americans are saving far less than normal in 2023
student loan repayments set to resume in October
Florida housing boom losing steam
Let’s dig in.
Markets in review
EQUITIES: Russell 2000 -0.20% | Dow -0.30% | S&P 500 -0.52% | Nasdaq 100 -1.35%
FIXED INCOME: Barclays Agg Bond +0.16% | High Yield -0.25% | 2yr UST 4.719% | 10yr UST 3.727%
COMMODITIES: Brent Crude +1.65% to $77.14/barrel. Gold -0.17% to $1,944.3/oz.
BITCOIN: +7.56% to $30,134
US DOLLAR INDEX: -0.47% to 102.061
CBOE EQUITY PUT/CALL RATIO: 0.50
VIX: -4.90% to 13.20
Quote of the day
“With every moment of your time, every decision about how you spend your energy and your money, you are making a statement about what really matters to you.”
- Clayton Christensen, How Will You Measure Your Life?
What people really care about
Clients won’t recall much, if anything at all, in the left pie chart a day or a week after meeting with your investment advisory team. In fact, even during the meeting, clients get glossy eyed when you talk about it. Too many numbers (which change daily), too much industry jargon, asymmetric information and interests, etc.
Instead, clients will always remember the conversations around their goals, values, cash flow and liquidity needs, net worth, and general investment performance – the pie chart on the right. These are deeply personal discussions that require deliberate planning and frequent check-ins. And because these meetings center around people’s personal, hard-earned savings, emotions are always a factor.
Source: Brendan Frazier
Personal debt burden
Like clutter in your house, carrying debt can stress you out and weigh you down. While many focus on managing the asset side of the personal balance sheet, it’s just as important to address liabilities in a mindful manner.
Some debt is healthy. For example, financing a home for your family or a car for meeting daily obligations around town.
Other debt is unhealthy. Think high interest credit cards or maintaining high credit utilization rates.
Some ascribe financial independence to the elimination of personal debt. Others, it’s not possible and that’s ok, too.
Source: Brian Feroldi
Market valuations
S&P 500 valuations today are elevated vs. history in both absolute and relative terms across a variety of key metrics.
Source: Goldman Sachs Global Investment Research
Americans are saving far less than normal in 2023
The U.S. consumer savings rate was only 4.1% as of April 2023, up from the 2.7% rate seen in June 2022 (15-year low) but well below the long-term average of 9%.
The personal saving rate is calculated as the ratio of personal savings to disposable personal income.
This was a large fall from periods of the pandemic when households across the country were saving as much as 30%+ of their monthly income.
Source: U.S. Bureau of Economic Analysis, Mike Zaccardi
Student loan repayments set to resume in October
After a three-plus-year-long pause, the Department of Education announced that student loan interest will resume on September 1 and payments will be due in October.
That could mean more financial stress for these borrowers, who haven't had to make a loan payment in years on the nearly $1.8 trillion of outstanding student loan debt. The pause is estimated to have saved borrowers $15K (~$416 per month).
Has unusually strong U.S. consumer spending been holding up the economy? Let’s see what happens when 43.5 million Americans start paying off their loans again.
According to Barclays, the restart of payments could lead to a monthly decrease of $15.8 billion in household spending, or $190 billion per year.
Source: St. Louis Fed, CNBC
Florida housing boom losing steam
The housing boom during the pandemic that sent Florida's real estate market into a frenzy has finally started to wane.
Single-family home prices in Florida have flattened for the first time since 2011, after climbing almost 50% in the past three years.
Inbound moves are slowing, while soaring mortgage rates and insurance premiums have eroded one of the Sunshine State’s most alluring attributes: affordability.
In fact, according to RealtyHop Housing’s May Affordability Index – which compares homeownership costs relative to income – Miami is now the least affordable housing market in the country. The median price for a home in Florida’s biggest city is $585,000. To be able to afford this, homeowners can expect to spend as much as 79.9% of their monthly income on homeownership expenses.
“The fact that Florida is getting more expensive is making it less attractive to homebuyers,” said Daryl Fairweather, chief economist for Redfin Corp. “It becomes a concern for people trying to fix their monthly housing expenses.”
That’s all for today.
Blake
Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily.