Key points.
- The widespread perception of a deeply unequal, K-shaped American economy overestimates the role of the wealthiest households. Broader data suggest that consumption growth has been more evenly distributed across different income brackets.
- They thus challenge the idea that the American economy has become much more vulnerable to a stock market downturn.
- American consumers have weathered the price shock and the post-pandemic inflationary surge; the latter has helped redistribute some of the wealth from savers to heavily indebted households.
- Rising energy prices have prompted us to revise our US growth forecast for 2026 downward to 1.9%. However, barring any major deterioration in the job market, we anticipate a continued resilient economic environment, which reinforces our moderate pro-risk stance within the portfolios.
American consumers are currently experiencing their third inflationary shock in just a few years, with the average price of gasoline exceeding $4 per gallon. Given the importance of US consumption to the global economy, we analyze the underlying causes and identify some signs of resilience.
American consumers have endured a series of post-pandemic inflationary shocks: a surge in inflation, which peaked around mid-2022, followed by higher prices for goods linked to tariffs. The conflict in the Middle East is now confronting them with rising energy and fuel costs, which President Trump has warned could persist “for some time.” While the prevailing narrative portrays a fragile American economy, dependent on the income of a wealthy minority, we are seeing signs of resilience in consumer spending across the population as a whole.
Over the past year, the theory of a K-shaped American economy—characterized by a stark contrast between prosperous consumers and those struggling with low incomes— has gained traction . Initially, this theory was supported by an analysis from Moody’s, arguing that the wealthiest 10% of American households accounted for 50% of total national consumption in 2025, a share that has been steadily increasing in recent years.
While the dominant narrative portrays a fragile American economy, dependent on the income of a wealthy minority, we are observing signs of resilience in consumer spending across the population as a whole.
Two further assumptions followed. First, given that the wealthiest American households hold the largest share of US stocks, the recent resilience of consumption stems largely from the strong performance of the stock market . Second, the US economy has consequently become more vulnerable to a stock market downturn.
Complex consumption dynamics
However, a closer examination of the data reveals flaws in this reasoning. Based on official data concerning the estimated share of disposable income going to the wealthiest 10% of households, as well as estimates of their savings rates, we calculate their share of total consumption to be closer to 30%. While still a high figure, it is significantly lower than that suggested by Moody’s analysis.
Consumption inequality also appears to have increased only moderately in the United States over the past few decades. Data from the U.S. Bureau of Labor Statistics shows that the share of consumption held by the top 20% of households was 37.1% in 1984. By 2023, the most recent year for which official data is available, it had risen to 38.3% . Since then, the message from alternative real-time data sources, including credit and debit card transactions, has been clear: the wealthiest American households have not increased their consumption significantly more than the rest of the population.
These data reveal small cumulative differences since 2023 between the spending of high-, middle-, and low-income households. The latest available data point, from December 2025, even indicates higher year-over-year growth for low-income consumers. Data from Bank of America , based on the use of their own credit and debit cards, as well as data from the financial services platform Stripe Inc. , broadly confirm these findings.
The spending habits of the wealthiest 1 to 2% of American households—roughly those with incomes exceeding USD 1 million per year—are difficult to quantify. However, based on the best available data, we do not believe that the remarkable recent resilience of the US economy rests solely on the shoulders of millionaires and billionaires.
We do not believe that the remarkable recent resilience of the American economy rests solely on the shoulders of millionaires and billionaires.
Post-pandemic inflation has contributed to a redistribution of wealth
Recent history sheds light on how this resilience has evolved. Following the pandemic, the US economy weathered several significant macroeconomic shocks. The first was the post-COVID inflationary surge. Yet, despite the Federal Reserve’s (Fed) sharp and rapid increase in interest rates, from zero to 5% in record time for the past forty years, the US economy recorded robust real consumer spending growth.
As we argued at the end of 2023, this growth in consumption was partly explained by the fact that over 90% of US mortgages were fixed-rate, and therefore immune to rate hikes. In the aftermath of the pandemic, we also observed a redistribution of wealth from creditors to debtors , whose propensity to consume is higher. Debtors benefited from significant inflation—which peaked at around 9% in mid-2022—eroding the real value of their debts. Fiscal support also enabled them to build up savings.
We have also observed a redistribution of wealth from creditors to debtors, whose propensity to consume is higher.
Consumers have withstood the shock of tariffs
The second major consumption shock was triggered by the “Liberation Day” tariffs in April 2025. As we pointed out immediately after the measure took effect , despite the significant uncertainty surrounding it, the U.S. economy was sufficiently healthy and independent of global trade to absorb such a shock without falling into recession. As long as unemployment did not rise substantially and average incomes continued to outpace the higher inflation rate generated by these tariffs, U.S. consumption could still grow, albeit at a slower pace. These expectations, including those of moderate domestic inflationary effects, have been largely borne out.
The rise in energy prices linked to the conflict in the Middle East now threatens to trigger a third shock. The two previous shocks helped to moderate spending growth. From our perspective, this slowdown in consumption growth primarily reflects a weaker US job market compared to previous years, largely characterized by a lack of both hiring and layoffs.
A gasoline price shock of this magnitude, with increases averaging 30% nationwide, is expected to significantly reduce demand for other goods, particularly discretionary spending, and encourage consumers to seek cheaper alternatives within the same categories . Many commuters rely on gasoline and have no choice but to absorb the price hikes.
However, given our baseline scenario of a de-escalation of the conflict in the Middle East, we believe most of these effects will be temporary and that gasoline prices will return to pre-war levels later this year. Our growth forecast for the U.S. economy this year has therefore been revised only slightly downward , from 2.2% to 1.9%.
Barring any signs of a marked deterioration in the job market, we believe that the American consumer will once again be able to absorb the shock.
While retail sales, excluding gasoline and other volatile items, remained relatively strong in March, this was also due to larger-than-usual tax refunds. Once these refunds are dispelled, US consumer spending is expected to stabilize at levels below those seen since the start of the pandemic. That said, barring any significant deterioration in the job market, we believe the US consumer will once again be able to absorb the shock.
The US economy is also robust. Fiscal policy supports growth, large companies benefit from solid fundamentals and earnings growth, and we still anticipate a Fed interest rate cut by the end of 2026. All these factors, combined with our forecast of a limited-duration conflict in the Middle East, reinforce our moderately pro-risk bias within the portfolios.
