The American consumer is not one thing but two, moving in opposite directions. Economists call it a "K-shaped" economy, after the letter whose two lines split apart: since the pandemic subsidies faded, higher-income households have kept spending briskly while lower earners have pulled back. The result is a US consumer economy that increasingly rests on the wealthy, and on the assets that make them feel wealthy.
What the split looks like
The spending gap shows up clearly in the data. Bank of America, which can see anonymized spending across its customer base, found higher-income households growing their card spending faster than lower-income ones, according to its Consumer Checkpoint research. More striking is the concentration: the top 10% of earners account for roughly 36% of all discretionary (non-essential) spending, while the bottom 10% account for around 2%, the bank's data show.
Zoom out and the same picture holds. The top two income groups, the best-paid 40% of households, now make up around 60% of all consumer spending, a share that dipped during the pandemic and has climbed back toward its earlier level, TD Economics reported. When that few drive that much, the health of the overall economy tracks their behavior more than anyone else's.
Why the top keeps spending: the wealth effect
The engine at the top is the stock market. Wealthier households own the large majority of stocks, so when markets rise, they feel richer and spend more, even if their salaries have not changed. Economists call this the "wealth effect". It helps explain why affluent spending has stayed resilient: as long as portfolios are climbing, the confidence to spend follows.
But the same research carries a warning about how fragile that support can be. Federal Reserve economists estimate that high-income households spend only about 0.8 cents of each extra dollar of wealth, while lower-income households spend around 7.5 cents, nearly nine times more, according to a Fed study. In other words, a dollar of stock-market gains does far less to power the broader economy than a dollar of wages spread across ordinary households. Growth built on asset prices is growth built on a narrower, shakier base.
Where the risk lies
Concentrated spending means concentrated risk. If the wealth effect that is holding up high-end demand reverses, the whole economy feels it. Analysts note it typically takes a sustained stock-market decline, on the order of 20%, to meaningfully dent affluent spending, so the cushion is real, but it is a cushion made of market prices, which can fall.
The divide is already visible on the ground. Premium brands and travel have reported strong demand from well-off customers, while value and mainstream retailers face flat traffic and shoppers trading down or cutting categories outright. Two different economies are being served by two different sets of stores.
A recent wrinkle
The picture is not static. The most recent readings suggest the gap between income groups narrowed somewhat in mid-2026, as lower- and middle-income households picked up spending, Bank of America noted. But its researchers cautioned the shift may be temporary, possibly flattered by one-off events, and that the underlying K-shape, set in place when pandemic support expired, remains intact.
Why it matters
For investors, companies and policymakers, the K-shaped consumer is a reminder that headline spending figures can hide who is actually doing the spending. An economy leaning on its top decile is strong as long as markets and high-end confidence hold, and unusually exposed if they crack. The single most important variable for US consumer demand may no longer be wages or jobs alone, but the level of the stock market, and the mood of the people who own most of it. This article is informational and not investment advice.
