The K shaped economy is described as “a growing gap between the highest earners and the richest corporations, who are spending and expanding their wealth, and the lowest-income households and mom-and-pop companies, who struggle to pay their bills day to day.” -Yahoo/Finance. The top 10% of earners account for 50% of the spending. This is 5.5% higher than in 2019.
The top of the K is heavily invested in the stock market, real estate and crypto. All of which have been growing disproportionately to the overall economy. So when those are growing, the top of the K spends. Think of all the services available like dog walkers and doggie daycare. Service businesses will be hurt if the stock market drops.
The stock market also has a K growth pattern. The magnificent 7 have grown 3x as much as the humble 493 in 2025. So, if AI loses its luster, the stock market will have a drop that leads to a recession.
Meanwhile the lower K are struggling with higher prices and stalled wage growth. Employment is dropping but we don’t know exactly how much because the Bureau of Labor Statistics stopped working during the government shut down. Increased costs are forcing cuts on discretionary spending. Chipotle which targets young people and less affluent customers is predicting declining sales. Purchases in supermarkets have shifted from branded products to the market brands. Snack purchases are down. Food pantries can’t keep up with the demand. And, while expensive cars are selling, more reasonable vehicles are getting discounted and still are not selling.
Keep this in mind as you plan your goals for 2026. This is a bifurcated market. Focus on your part of the market. And, plan carefully with strategies that take all of this into account.
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