The top 20% of American earners drive between 36% and 57% of all consumer spending, depending on the measure.
But when it comes to equity markets, it’s even more lopsided: 75 cents of every dollar of spending generated by the equity rally flows through the top quintile.
That total is more concentrated than any existing estimate of aggregate spending—and it suggests that if we are counting on the stock market to sustain the consumer economy, we are leaning on a channel that deepens the K-shape rather than offsets it.
The scale is modest, too. Using equity-specific spending propensities from a recent Federal Reserve Board study, we estimate that every dollar of stock market gains generates less than a penny of consumer spending—roughly 0.8 cents.
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Put differently, every $1 trillion in equity gains produces about $8 billion in direct consumer spending, or roughly $14 billion in total economic impact with the multiplier.
Applied to the current rally—the S&P 500 has risen 21% since the third quarter of last year, adding an estimated $7 trillion in equity wealth—the total spending boost is about $53 billion, a quarter of a percent of personal consumption and roughly 30 basis points of gross domestic product.
The asset-based economy that defines the upper two quintiles of income earners is driving overall economic activity. But it is not sufficient to compensate or support the middle class, working class or working poor.
It results in a split-screen economy that has significant policy implications for the Federal Reserve and the fiscal authority.
With the current policy framework tilted toward upper-end consumers, one should anticipate that the inequality inherent in the difference between those who own assets and those who do not will widen.
As such, investors and businesses will likely move up-market to increase their exposure to those who inhabit the asset-based economy or the upper spur of the K-shaped U.S. market.
The spending economy is already top-heavy …
How top-heavy depends on the source, and the sources disagree.
The answer is that it’s a range: The top 20% drives between 36% and 57% of total consumer spending. Either way, the K-shape is real. The question is whether the stock market rally reinforces that pattern or amplifies it.
… as the K has grown steeper
The top 20% by income holds 87% of all corporate equities and mutual fund shares—roughly $55 trillion as of mid-2026. The bottom 80% holds about $8 trillion.
A recent Federal Reserve Board study by Samara Beach, William Gamber and Patrick Moran (2025) decomposed the wealth effect by both income group and asset type.
They found that the equity-specific spending propensity for the top 20% is 0.65 cents per dollar of equity wealth, while the bottom 80% is 1.49 cents.
The bottom group has a higher per-dollar propensity, but the top 20%’s significant ownership advantage overwhelms the difference.
The result: 75% of all wealth-effect spending from the rally goes to the top 20%.
When it comes to overall spending …
No matter which estimate of spending concentration you use, the wealth-effect channel is more skewed toward the top. If the top 20% drives 36% of overall spending, the rally’s 75% share is more than double the economywide pattern.
If the top 20% drives 57%, the rally is still meaningfully more concentrated. The stock market does not offset the K-shape in the economy—it deepens it.
… the impact is small …
A roughly $7 trillion rally producing $53 billion in spending amounts to less than a penny per dollar of gains.
Equities are the weakest asset class for generating consumption—the category-specific marginal propensity to consume of 1.18 cents is less than a quarter of the 5.15 cents estimated for housing wealth. The rally is a pure equity event running through the channel that produces the least spending per dollar.
… even as it adds modestly to growth
At the mid-range, the rally adds about 30 basis points to GDP—roughly one-fifth of the economy’s 1.6% growth rate in the first quarter.
That figure is not negligible, but it is arriving in an economy where consumer spending is losing momentum, core inflation is running at 3.3%, the saving rate has fallen to 2.6%, and AI capital expenditures rather than consumer spending are doing much of the lifting.
Research by Gabriel Chodorow-Reich, Plamen Nenov and Alp Simsek finds that stock gains start affecting spending within a quarter but do not peak for one to two years. The large rally in the second quarter is still early in the pipeline. Its full contribution will not arrive until late 2027.
The bottom line
The American consumer economy already leans heavily on the top 20%. The stock market rally leans on that group even more—75 cents of every dollar of wealth-effect spending flows to that group, steeper than any estimate of their overall share.
And yet the impact on the economy is small: Less than a penny per dollar of equity gains, roughly $8 billion in spending for every trillion dollars the market rises, about 30 basis points of GDP with the multiplier.
The wealth effect from equities does not offset the K-shape in the economy. It deepens it—and it does so at a scale too small to substitute for the tailwinds that are missing. If you are counting on the stock market to carry down-market consumers, you are counting on a channel that is simultaneously too concentrated and too weak to do the job.
Sources and methodology
Equity data: Federal Reserve Distributional Financial Accounts, Q3–Q4 2025 actual, by income percentile. Q1–Q2 2026 projected via S&P 500 returns (close 7,511, June 16, 2026). Equity-specific MPCs: Beach, Gamber & Moran (2025), “Wealth Heterogeneity and Consumer Spending,” FEDS Notes, Aug 5, Figure 5(a) quintile contributions (top 20%: 0.65¢; bottom 80%: 1.49¢; category MPC for equity: 1.18¢; housing: 5.15¢). Multiplier range: Ramey (2019, JEP); Mercatus survey of 67 studies.
Spending concentration: BLS Consumer Expenditure Survey 2024 (top 20% = 36%, direct survey, released Dec 2025); Dallas Fed, Hoham & Yang (Nov 2025, 57%, tax-adjusted residual); Moody’s Analytics (59%, unadjusted residual). Timing: Chodorow-Reich, Nenov & Simsek (2021, AER); Poterba (2000, JEP). GDP: BEA, $31,819B nominal SAAR Q1 2026; real growth +1.6% Q1 2026 (second est). PCE: $21,979B SAAR April 2026 (BEA via FRED).
This is economic analysis, not investment advice.
