There is a 4-letter word in financial services that wreaks havoc and can create a debilitating condition wherever you find it. That word is DEBT. There’s good debt and bad debt. There’s household debt, company debt and government debt. It’s not visible to the naked eye but it’s always there under the surface breaking things apart from the inside out.
Not all debt is bad – looking at all of you fortunate mortgagees with a 2.25% mortgage seized in 2020 or 2021. But most of the time, debt that is growing and unattended (or worse ignored), will cause an eventual downfall.
When you look at household debt, it’s hard to get past the sticker shock of $17.94 trillion in total household debt1. To put that in context the US budget spent 6.75 trillion in 2024. So the household debt number is nearly 3X that. That number is up $147 billion from the last quarter. While that seems significant and there are, of course, plenty of households that are struggling but by and large the consumer is in good shape. Income growth is surging faster than inflation which is strengthening the labor market.2 Home values are going up. Investment accounts are headed in the right direction. Both of these factors certainly help the “haves” or the top 20% of consumers which comprise the top 40% of spending, according to Marketplace. So, it appears that household debt, while scary looking at top-level data, doesn’t look nearly as bad when you remove the cover. The bottom rungs of American households with respect to their finances do find themselves struggling. The data of US subprime auto loans shows that the delinquency rates in that area leapt to 6.2% in December, which is the highest December on record3. The rate has doubled for serious delinquency over the last 3 years, so household debt has become a tale of the haves and have-nots.
In financial services, one person’s debt is another’s opportunity to better their lives. The particular debt we’re keeping track of for your benefit is the rate on the 10-Year Treasury Note. As of this writing that’s priced at 4.63%. It serves as a bellwether for understanding public perception of the efficiency of buying bonds and something our Investment Committee has been eyeing as it relates to your portfolios. Since the rate cuts of September, the 10-year has climbed. It prompted us to reposition our tactically traded bond portfolio to evenly invest in things that do well when rates rise and things that do well with falling rates.
This week our Investment Committee took the further step of looking at every allocation in our bond portfolio and reassessing if we had the best ETF combination of yield and growth and strength that we could find for your investments. We’re pleased to report we’ve been able to further strengthen all of these factors for you to give you the most income, with the most growth potential, at the best financial strength we could achieve for you in every fixed income category we invested your money in. If you saw reports of trades this week, that is your Tactical Fixed Income Portfolio in action.
More income. More growth. More peace of mind. Those are our goals for you. If you need any of these three give us a call so we can better understand and re-engineer your portfolio.
Always call us if you need financial advice. Ask us questions. Help us help you.
If you listen to us, we’ll change your financial world.
Sincerely,
The WTA Investment Committee
Sources:
1https://www.newyorkfed.org/microeconomics/hhdc
2 https://www.marketplace.org/2025/01/22/consumer-spending-credit-card-auto-loan-delinquencies/
3@TheKobeissiLetter
