Jill On Money: Is the economy A-OK?

"Here's how it works: Picture the letter K. The top arm goes up, which represents those parts of the economy that are doing well, like tech (specifically those companies with exposure to artificial intelligence) and high earners who own homes and investments. On top of these two distinct groups, many companies that were exposed to the Trump tariffs, tried to front-run them by loading up on inventory in March and July."

"Those purchases, along with massive AI spending (estimated to account for 40 percent of economic growth this year), has juiced up economic activity, and propelled the stock market to new highs. For those who owned stocks, that was great news. And while there is evidence that the pandemic created a new generation of investors, they still account for a small share of the overall ownership in the stock market."

Economic growth and stock market gains have been concentrated in specific sectors and among asset holders, producing a K-shaped economy. The upper arm includes tech firms with AI exposure and high earners who benefit from rising stock and house prices. Inventory front-loading ahead of tariffs and massive AI spending—estimated to account for 40 percent of economic growth this year—have boosted activity and equity valuations. The top 10 percent of households own a record 89 percent of U.S. stocks, while the S&P 500 and house prices have risen sharply. The lower arm covers those earning under $175,000 who face job worries, high prices, small retirement balances, and a day-to-day focus.

Read at www.mercurynews.com