Jim Niedelman:

It’s time for, 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Great to see you as always, David.

David Nelson:
Thank you, Jim. I appreciate it.

Jim Niedelman:
Oh, we continue to see a lot of soft economic data. However, there are some bright spots. What do you see that can be put in the positive column?

David Nelson:
So, it’s nice to have some good news to talk about. But, let me focus on the not so good news. And that is, most of the economic data that we’re seeing as far as in recent times, is the process that we’re going through as far as catching up to get back to pre-pandemic levels, which we’re not even close to yet. I brought along a chart that’s basically going to show as far as the consumer, and the lack of spending. But there is some good news as far as that’s on this chart, and I want people to really focus on couple terms here. We’ve got debt, we’ve got disposable income. And, disposable income basically is looking at your income minus taxes. And, what we’re seeing with this visual here and I hope people really digest this. This is 40 years of data, looking at how much of your paycheck are you using to service debt, long-term debt.

David Nelson:
Think in terms of a mortgage. What we find, if you look at the far right there where the arrow’s pointing, is it showing a diving as far as.. And, usually when you see something go down like that, its bad news. But actually, what this is illustrating Jim, is that the amount of money that people are spending servicing debt, is hit a 40 year low. This is fantastic news. Now by doing that, the great news basically centers around two things. The two factors are refinancing. People are refinancing from four and 5% loans, to now two and 3% loans; and then, the income, the disposable income that people have. A lot of the stemming from the stimulus that’s been doled out, as far as over the last several months.

Jim Niedelman:
Idea being, people are saving and have the opportunity to spend more money possibly. So, what role does this dynamic play in the overall economy?

David Nelson:
Yeah. So, I think most people probably know that the consumers, the big driver, as far as the U.S. economy. It actually is over 70% in most years. And so, now with people able to spend more money on other things other than servicing debt, we think this is going to be fantastic news for large purchases, as far as going forward.

Jim Niedelman:
It could be certainly an economic driver. Are there any implications of this that can be applied to the portfolios that people have at home?

David Nelson:
Yeah. Low consumer debt is almost always associated with higher levels of economic growth. And again, for risk assets which is another way of saying primarily stocks, this is fantastic news. Again, we can’t look at just one item. We talk about the weight of the evidence all the time, as far as the importance of that. But again, when you have the debt load less, that allows people to spend more as far as on other stuff, which then is a driver as far as of the economy. Low interest rates, vaccine moving forward, we’ve got some really good news. And again, people should probably think in terms of taking advantage of this, as far as going forward.

Jim Niedelman:
David Nelson of NelsonCorp Wealth Management. Thanks for the insights.

David Nelson:
Thank you, Jim.

Jim Niedelman:
If you missed any of this discussion, we have that available for you on ourquadcities.com.