1. Top 10% of earners now fuel nearly 50% of consumer spending, boosting GDP. 2. Their share rose from 36% three decades ago, marking a historic change. 3. Asset gains drive spending but risk reversal amid stretched valuations and policy uncertainty. 4. Lower- and middle-income households face inflation and high interest rates, reducing spending.
The report shows that while wealthy households boost GDP via high consumer spending, the risk of an asset correction (similar to post-boom corrections seen in past cycles such as 2008) could negatively impact market valuations, including those within the S&P 500.
The wealth effect and its sizable influence on GDP, coupled with uncertainty over asset values, imply a significant long-term impact on S&P 500 components, despite the indirect nature of the news.
The structural shift in consumer spending patterns is a multi-decade trend; however, potential asset corrections can gradually affect the market over time.