There's a theory being widely distributed right now called the "K-shaped economy."

The idea is that the economy has been working wonderfully for some people while others are being left behind.

I'm confident this isn't really a theory at all—it's just reality.

The way I see it, there are only two kinds of economies:

1. Economies that work for some, but not everyone
2. Economies that work for almost no one (think 1930, 1974, or 2008)

There has never been an economy that works perfectly for everyone at the same time.

There will always be people struggling, even when things look strong in the aggregate.

So while the current economy is certainly imperfect, we should be careful about assuming it's uniquely broken simply because not everyone is thriving.

This distinction matters, especially when we're constantly exposed to narratives suggesting things are far worse than the data supports.

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Before we dive in, did you catch this week's podcast? 👇

What Happens to Your Taxes When a Spouse Dies In this episode, I break down a lesser-known tax rule that can increase taxes after the loss of a spouse and what couples can do now to reduce that risk. 🎙️ Listen now on Apple​, ​Spotify​, or ​YouTube​.

Is the Middle Class Really Disappearing?

We've been told for years that the middle class is shrinking, often cited as evidence that more people are being left behind.

And technically, that's true.

But why it's shrinking matters.

The middle class hasn't disappeared because millions have fallen downward; it's largely because many households have moved up.

In 1967, just 5% of households earned more than $150,000 (adjusted for inflation).

Today, more than 30% do.

On the other end of the spectrum, over 38% of households earned less than $50,000 in 1967.

Today, that figure is closer to 21%.

In other words, a meaningful portion of the shrinking middle class didn't vanish—it graduated into the upper-middle class.

That doesn't fit neatly into a doom-and-gloom narrative, but it's an important part of the story.

What About Wealth Inequality?

Another common claim is that rising asset prices have benefited only the top 1%.

It's true that the wealthiest households are getting richer on a dollar-for-dollar basis—that's exactly how compounding works when you start with more capital.

But when we look at shares of total wealth, the picture is more stable than most people realize.

As of the second quarter of 2025, the top 1% held roughly 29% of total U.S. wealth, compared to about 28% in 2000.

That doesn't mean wealth inequality doesn't exist. It clearly does.

But there's a meaningful difference between acknowledging inequality and assuming we're on a one-way path toward a permanent divide between the "haves" and the "have-nots."

The data simply doesn't support that conclusion.

The world is getting richer in many places, you just have to look beyond the headlines to see it.

And Then There’s Inflation

Inflation may be the most emotionally charged topic of all.

For the past few years, it's often been described as wildly out of control.

That characterization made sense in 2022, but it doesn't reflect where we are today.

Inflation has been well-contained and steadily declining for the past three years.

It's been below 3% for the last two, coming in at 2.7% in 2025.

Yes, that's higher than what we experienced during the ultra-low-inflation, zero-interest-rate era of the 2010s.

But I suspect many people don't realize that inflation has been fairly reasonable again for quite some time.

Why the Disconnect?

None of this is meant to dismiss the very real struggles some people are facing.

There are absolutely households under significant financial pressure.

But given the data, it's worth pausing to ask a different question:

Media outlets (regardless of political leaning) are incentivized to highlight what's wrong.

Discontent grabs attention.

Fear keeps us engaged.

Outrage spreads.

And as humans, we're wired to focus on problems.

The downside?

In the process, we often ignore—or outright dismiss—what is working.

And quite a lot is working.

A More Grounded Perspective

This isn't an argument that everything is perfect. It isn't.

Legitimate challenges remain, and thoughtful solutions matter.

But for all its flaws, this is still an economy that works for many, and that's vastly preferable to one that works for almost no one.

Perspective matters. Especially when making long-term financial decisions.

Keep that in mind the next time a headline tells you the entire system is broken beyond repair.

📚 What I've Been Reading

• The Ongoing Fight Against Frivolous Tax Arguments (The Tax Advisor)​
• Why Making Retirement Decisions Based On Happiness Studies May Not Be A Good Idea (Kitces)​
• Low Inflation Does Not Mean Americans are Fine (Boston College)​
• One in a Quadrillion (Fortunes & Frictions)​
• These Are My Reading Rules For 2026 (Ryan Holiday)​

Thank you for reading!

Please reply to this email with comments, questions, and/or feedback.

Stay wealthy,

Taylor Schulte, CFP®