Dec 04 • 3 min read
Navigating Two Economic Worlds
|
The stock market hits new highs, luxury brands shatter earnings expectations, and Delta sells more premium seats than coach. On the surface, it looks like everything is booming. And yet, some people are postponing medical care, food bank lines are stretching around city blocks, and car repossessions are climbing. For many households, it doesn’t feel like a boom at all. So…is the economy booming or breaking? Yes. One Economy. Two Experiences.There’s a growing divide in how Americans experience the economy, and it’s largely shaped by income. According to JPMorgan's latest Cost of Living Survey, nearly 60% of high earners say their monthly bills feel easier to manage than a year ago. Only 30% of lower-income consumers say the same. This gap isn't just showing up in surveys—it's written all over corporate earnings reports:
In other words, this isn’t just a feeling. The economy really is moving in two directions. Who Owns What (And Who Feels What)Over the last five years, home values have jumped more than 49% and the S&P 500 is up roughly 100%. Altogether, Americans have gained over $55.6 trillion in wealth. But those gains haven't reached everyone equally. The wealthiest 10% of Americans hold nearly 9 out of every 10 invested dollars. When markets rally, that group rides the wave. Their portfolios grow, their balance sheets look stronger, and they tend to spend more freely. Meanwhile, the rising cost of basics—groceries, gas, rent—hits lower- and middle-income households the hardest. Even a modest price increase can squeeze a tight budget. And with interest rates still elevated, credit cards and personal loans are no longer a safety valve; they're a liability. There's also a psychological dimension. As Morgan Housel writes in the article Two Worlds, we used to compare ourselves mostly to people who lived and worked like we did—neighbors, coworkers, our local community. Now, social media drops the highlight reels of the global top 1% into our pockets all day long. The wealth gap doesn't just exist in the numbers; it feels more visible, personal, and extreme than ever. A Permanent ShiftA helpful mental image is two escalators running side by side. On one, wealthier Americans are carried higher—lifted by stock gains, home equity growth, and strong spending power. On the other, many middle- and lower-income households are being pulled down—strained by higher prices, more expensive debt, and a softer job market in certain sectors. Same economy. Two very different rides. This divergence might be more than just a temporary cycle; it could signal a permanent shift in how we handle economic downturns. In Episode 93 of the Stay Wealthy Retirement Show, I discussed this fascinating historical parallel from Housel's article: Just as the chaos of the Great Depression gave rise to Social Security, our modern era of crisis responses may be cementing 'permanent stimulus' as a standard economic feature.
Recent stimulus efforts, taken together, roughly match what the U.S. spent fighting World War II.
When that much money floods the system, it inevitably flows to assets (boosting the wealthy) while leaving others to grapple with the resulting inflation.
What Actually MattersIn a two-track economy, the most important question isn't which escalator you are on today. The real question is how prepared you are for what might come next. This is where thoughtful planning proves its value. A good plan helps you understand how market gains and inflation affect your specific situation. It helps you decide how much risk you actually need to take and aligns your spending with your values rather than social media trends or headlines. Markets, prices, rates, and your own life can all shift quickly. 👉 If you would like to discuss whether your plan still fits this reality, my team and I am here to help. 📚 What I've Been Reading
Thank you for reading! Please reply to this email with comments, questions, and/or feedback. Stay wealthy, Taylor Schulte, CFP® |