Semiannual Wealth Outlook: Collection Liquidation Results May Improve Amidst Positive Wage and Disposable Income Trends

May 18th, 2017

When it comes down to it, wealth-related economic metrics are arguably the most important when analyzing the economy. At its core, the economy is healthy when individuals, on average, are earning and spending more money, and economic livelihood is expanding. After gathering data from Q4 of the past three years, we can surmise that the economy continues expanding, albeit with some precautions. Additionally, although the full details of President Trump’s tax plan have yet to be disclosed, we can speculate that the population, as a whole, would have a lower tax burden. Assuming targeted tax credits like the Earned Income Tax Credit are not eliminated, this could lead to low-income families attaining higher levels of disposable income in order fund daily expenses. This may further stimulate growth for the various wealth metrics listed below, prompting significant increases in expenditures – leading to higher debt levels – and, potentially, better repayment of existing debts, creating a dual effect for the ARM industry depending on which of the two impacts proves stronger.

The above chart details year-over-year data for a few key wealth metrics. From an income perspective, real personal disposable income per capita, real median personal income, and median usual weekly earnings all increased during the past few years, which suggests improvement in average wages. At the same time, spending in the U.S. appears to be smoothly trending upward; real personal consumption expenditures are growing, in addition to rises in the U.S. national home price index (HPI), and retail sales. However, the median one-year ahead household income growth expectations, personal saving rate (PSR), and median one-year ahead household spending expectations have fluctuated over the observed three-year period but hovered around 2.7%, 5.8%, and 3.7%, respectively. This may be due to stagnancy in the Federal Reserve’s (Fed) policies, primarily maintaining historically-low interest rates following the Great Recession. Recently, the Fed raised its rates twice – once in December and another in March – suggesting a more optimistic economic outlook; however, rates still maintain relatively low levels. If they continue raising rates as expected, we should see a slowdown in overall spending and an increase in savings – both of which may be significantly impacted by President Trump’s economic policies.

One major wealth-related concern, however, is the Gini index – a metric that measures the level of income inequality in a country – which has been growing steadily over the past few decades (our “Fading American Dream” blog). Average data (i.e., using the “mean” calculation instead of “median”) can easily deceive the large gap between rich and poor since the mean may be highly skewed by outliers for the extremely wealthy or incredibly poor. . As we stated in our above-mentioned blog, the continuation of this trend may lead to both positive and negative outcomes for the ARM industry, but it’ll undeniably be burdensome on an increasingly-large number of U.S. residents.

Nonetheless, after examining the presented data and considering other non-wealth-related metrics, such as consumer sentiment and non-employment indexes, we are confident that national expenditures will continue to increase.

With regard to the ARM industry, we believe the data presented above provides an optimistic outlook. Additionally, assuming – income that is adjusted for inflation – continue to rise and outpace people’s costs of living, then we should expect borrowers to be more likely to repay existing debts since they now have excess funds. However, the Trump administration promises to implement substantial changes to healthcare and federal income tax policy, among other things, which may significantly alter the economy’s current trajectory.

Comments are closed.

LATEST BLOGS

Options Abound for Sellers of Lower Middle Market Businesses

July 18, 2017

There is no shortage of buyers for a selling company in the lower end of the middle market. Sorting through all prospective buyer candidates to find the very best for your business is a challenge that any owner shouldnt take lightly.....

» see this post    » all posts


Changing with the Times: Cybersecurity in Collection

July 13, 2017

Collection agencies have a lot of valuable information that hackers are looking to get their hands on. Are you protected?....

» see this post    » all posts


Is Your Business Prepared for a Sale?

July 11, 2017

Preparing a business for a potential sale is not only a defensive move that an owner can take, but it is also prudent to business. Here are a few ways to make sure you're prepared.....

» see this post    » all posts


RECENT ANNOUNCEMENTS

Kaulkin Ginsberg Moves Its Market Intelligence Online

June 8, 2017

Kaulkin Ginsberg is changing the way busy owners, executives, and senior leaders access strategic market intelligence with the launch of KG Prime. KG Prime is a comprehensive and easy to use web-based service that provides users with economic, market segment, and other forms of strategic research.....

» see more




AXIAL FORUM - Publishes "Succession Planning - A Critical Missing Element in Many Family-Owned Businesses"

June 7, 2017

AXIAL FORUM, a web-based strategic mediator for the M&A industry, recently published an article succession planning by Topline Valuation Group. This article was co-authored by members of the Topline Valuation Group and Kaulkin Ginsberg team....

» see more




ACA of Texas Publishes "Three Critical Healthcare Industry Trends for Outsourced Business Services" in its Winter 2017 Magazine

March 16, 2017

The ACA of Texas Publishes "Three Critical Healthcare Industry Trends for Outsourced Business Services" by Kaulkin Ginsberg in its Winter 2017 Magazine. Kaulkin Ginsberg details its belief that the growth in patient lending and financing programs, clinical integration networks, and physician quality reporting systems for the Centers for Medicare and Medicaid Services (CMS) could have profound effects on companies focused on servicing healthcare providers in 2017 and beyond.....

» see more