At West Advisory Group, we always remind our clients that the heartbeat of the U.S. economy is the consumer. In fact, household spending makes up nearly two-thirds of all economic activity, which is why it plays such a big role in driving growth and keeping things moving forward. 

But here’s the twist we’re seeing in today’s data: not all consumers are pulling equal weight. 

The highest-earning households are shouldering more of the spending than we’ve seen in decades, creating an imbalance that’s shaping the direction of the economy. Understanding this shift is key to making sense of where we are right now—and what it could mean for your investments as we head into the months ahead.

The Top 10% and Their Outsized Impact

Households in the top 10% of the income distribution accounted for 49.2% of total consumer spending in the second quarter of this year, up from 48.5% the prior quarter—the highest share recorded since 1989. In other words, one-tenth of the population is now driving nearly half of all consumer activity.

For affluent households, elevated asset values—whether in equities, real estate, or other investments—have offset inflationary pressures. Many experienced notable net-worth gains during the post-pandemic recovery, enabling them to maintain discretionary spending even amid higher interest rates and tighter credit conditions. Demand for luxury travel, dining, and high-end goods remains resilient.

This concentration of spending has played a central role in preventing a broader economic slowdown. Despite slower hiring and job growth, consumer activity has not contracted sharply because wealthier households continue to spend and invest.

A Divergence Beneath the Surface

By contrast, the environment is more challenging for middle- and lower-income households. Rising debt delinquencies and persistent inflation are eroding their financial stability. Borrowing costs have surged, with credit card APRs and auto loan rates hovering near multi-decade highs. For many families, wages are not keeping pace with rising expenses for housing, healthcare, and everyday goods.

Recent payroll revisions revealed job growth over the past year was only about half as strong as initially reported. Additionally, unemployment among Black Americans has increased at the fastest pace since 2020, reaching 7.5%—double the rate for White Americans—reversing much of the progress made in narrowing the unemployment gap over the last three years.

Together, these dynamics illustrate a “two-track” economy: one group maintains a strong financial position, while another faces mounting pressures.

Why This Matters for the Economy

The resilience of higher-income consumers has helped stave off recession, but questions remain about how sustainable this trend is. If affluent households reduce spending due to declining portfolio values, market volatility, or cyclical shifts, the weakness among other groups could make overall growth far more vulnerable.

A consumer base so reliant on a single demographic also risks amplifying volatility across retail, housing, and equity markets. Luxury-focused companies may continue to perform well, even as mass-market retailers struggle. For policymakers, this imbalance underscores the limitations of monetary policy, which can affect households differently depending on their income and wealth levels.

Investment Implications

For investors, the current environment demands careful consideration. Several themes stand out:

Luxury and High-End Consumer Trends: Companies serving affluent households may remain relatively insulated from cyclical downturns. Premium travel, luxury goods, and boutique services continue to demonstrate resilience and may present opportunities. Resilience in premium segments is evident as certain luxury-oriented equities demonstrated notable performance during Q2 2025. For example, the RealReal stock returned 83% over the quarter, while some international luxury brands posted robust organic growth despite global demand softening. This divergence reflects the outsized impact of affluent consumers and can be seen in segment returns for leading luxury firms, though sector volatility remains.

Mass-Market Headwinds: Firms heavily reliant on middle- and lower-income consumers could face persistent challenges. Rising delinquencies and limited credit access warrant caution in sectors such as retail, quick-service dining, and mass-market apparel.

Credit and Banking Sensitivities: Increasing delinquencies pose risks to financial institutions with significant consumer-lending exposure. Regional banks and subprime lenders appear most vulnerable.

Equities vs. Fixed Income: Equity markets have largely mirrored high-income consumer resilience, with broad benchmarks such as the S&P 500 returning 10.9% and the MSCI ACWI index gaining 11.7% in Q2 2025. These returns illustrate the continued momentum in sectors that benefit from discretionary spending. Meanwhile, high-quality fixed income—such as the Bloomberg US Aggregate Bond Index—provided 1.2% for the quarter, with investment-grade corporate bonds and short-duration Treasurys delivering similarly positive but more modest gains. These results highlight how both asset classes have responded to elevated interest rates and selective consumer demand.

Long-Term Diversification: An economy so dependent on one consumer segment is not a sustainable foundation. Diversifying portfolios across sectors supported by long-term themes—such as technology, healthcare, and the energy transition—remains prudent.

What Clients Should Keep in Mind

For prospective investors, this environment reinforces the importance of long-term wealth building and prudent financial planning. The households currently driving economic resilience are those that have managed debt responsibly, built savings, and invested consistently over time.

For existing clients, vigilance is key. While the economy has exceeded expectations, underlying imbalances remain. Overreliance on affluent consumers does not guarantee stability. Maintaining diversification, ensuring adequate liquidity for near-term needs, and aligning risk tolerance with potential volatility are as essential now as ever.

Guidance Moving Forward

At West Advisory Group, we’ve seen firsthand how unpredictable the economy can be—whether it’s resilient consumer spending in some sectors or financial strain in others. These ebbs and flows are reminders that while we can’t control every headline or economic twist, we can control how we prepare for them.

That’s exactly why we developed our PEAK FORMula—a disciplined, proven process designed to help clients transition smoothly from the accumulation phase of their working years to the distribution phase of retirement. Over the years, we’ve mastered the controllable aspects of retirement planning, ensuring that our clients can navigate changing markets with clarity and confidence.

For those within five years of retirement, this moment calls for balance: recognizing the durability of certain trends while preparing for risks that may not be immediately visible. With thoughtful planning, diversification, and the steady guidance of our team, you can feel confident that your long-term goals remain within reach—regardless of market shifts.

Sources &References: Bloomberg, Marketplace (Consumer Spending), Quartz, Cotality,, Marketplace (Debt) ,CNBC ,FinancialContent, Bloomberg (Black Unemployment), Newsweek ,CNN, Axios