Surging equities are disproportionately benefiting higher-income households.
Key takeaways
At the same time, the benefits to middle- and lower-income households are limited.
Every dollar of equity gains generates about a penny to a penny and a half of consumer spending.
The top 20% of American earners drive between 36% and 59% of all consumer spending, depending on the measure.
But when it comes to equity markets, it’s even more lopsided: Between 42 and 71 cents of every dollar of spending generated by the equity rally flows through the top quintile of earners.
That significant share is, at the upper end of our range, more concentrated than any existing estimate of how aggregate spending is distributed.
It suggests that if we are counting on the stock market to sustain the consumer economy, we are leaning on a channel that only steepens the K in the K-shaped economy, where upper-income households thrive while the others are left behind.
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The scale is modest, too. Using recent studies on propensity to consume by income group, we estimate that every dollar of stock market gains generates roughly a penny to a penny and a half of consumer spending—between 1.2 and 1.7 cents.
Put differently, every $1 trillion in equity gains produces between $12 billion and $17 billion in direct consumer spending, or roughly $21 billion to $30 billion in total economic impact once the multiplier effect ripples through the economy.
Applied to the current rally—the S&P 500 has risen roughly 10% since the third quarter of last year, adding an estimated $5.4 trillion in equity wealth—the total spending boost is roughly $60 billion to $90 billion, or 0.3% to 0.4% of personal consumption and roughly 35 to 50 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, the gap between those who own assets and those who do not will widen.
As such, investors and businesses will most likely move upmarket 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
Sources disagree on how top-heavy the economy is.
The data shows a range: The top 20% drives between 36% and 59% of total consumer spending. With either figure, the K shape is real. The question is whether the stock market rally reinforces that pattern or amplifies it.
... and the K has grown steeper
The top 20% by income holds 87% of all corporate equities and mutual fund shares—roughly $53 trillion as of mid-2026. The bottom 80% holds about $8 trillion.
A 2025 Federal Reserve Board study by Samara Beach, William Gamber and Patrick Moran decomposed the wealth effect by income group and asset type.
They found that the top 20% spends just 0.8 cents of each additional dollar of wealth, while the bottom 80% spends 7.5 cents. Because no U.S. study directly estimates those propensities for stock wealth alone, we pair the Fed’s figures with equity-specific evidence from Swedish household data by Marco Di Maggio, Amir Kermani and Kaveh Majlesi, which finds a narrower gap between the groups for stocks.
The bottom group has a higher per-dollar propensity, but the significant ownership advantage of the top 20% overwhelms the difference.
The result: Between 42% and 71% of all wealth-effect spending from the rally goes to the top 20%, depending on the propensity estimates used and the window measured.
We deliberately report the full range rather than a single number. Point estimates swing with the quarter measured—the split of equity gains moves with the market—and the propensity evidence is itself a range, not a point. The bounds are more durable than any single data point.
When it comes to overall spending ...
Regardless of which estimate of spending concentration is used, the wealth-effect channel is skewed toward the top. If the top 20% drives 36% of overall spending, the rally's range tops out well above the economywide pattern.
Even the low end of the range exceeds the survey-based floor for overall spending, and the upper end exceeds every existing estimate. The stock market does not offset the K shape in the economy—it makes it more pronounced.
... the impact is small ...
A roughly $5.4 trillion rally producing $60 billion to $90 billion in spending amounts to little more than a penny per dollar of gains.
Equities are the weakest asset class for generating consumption—the category-specific marginal propensity to consume is 1.18 cents, 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 midrange, the rally adds roughly 35 to 50 basis points to GDP—about a quarter to a third of the economy’s 1.6% growth rate in the first quarter.
That figure is not negligible, but it lands in an economy where consumer spending is losing momentum, core inflation is running at 3.4%, the saving rate remains a low 3%, and artificial intelligence capital expenditures rather than consumer spending are doing much of the lifting.
Recent 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 them even more—between 42 and 71 cents of every dollar of wealth-effect spending flows to that group, with the upper end exceeding any estimate of their overall share.
And yet the impact on the economy is small: little more than a penny per dollar of equity gains, roughly $12 billion to $17 billion in spending for every trillion dollars the market rises, and about 35 to 50 basis points of GDP with the multiplier.
The wealth effect from equities does not offset the K shape in the economy. It makes it more pronounced—and at a scale too small to substitute for the missing tailwinds. Counting on the stock market to carry down-market consumers means 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 7,343, Jun 26, 2026)
Equity-specific MPCs: Beach, Gamber and Moran, “Wealth heterogeneity and consumer spending,” FEDS Notes, Aug. 5, 2025, Figure 5(a) quintile contributions (top 20%: 0.65 cents; bottom 80%: 1.49 cents; category MPC for equity: 1.18 cents; housing: 5.15 cents)
Multiplier range: Ramey (2019, Journal of Economic Perspectives)
Mercatus survey of 67 studies
Spending concentration:
BLS Consumer Expenditure Survey 2024 (top 20% = 36%, direct survey, released December 2025)
Dallas Fed, Hoham and Yang (November 2025, 57%, tax-adjusted residual); Moody’s Analytics (59%, unadjusted residual)
Timing: Chodorow-Reich, Nenov and Simsek (2021, AER); Poterba (2000, Journal of Economic Perspectives)
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.
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