A client asked me this last week, and I think it’s the question of our moment.
When I asked what they meant by “the economy doing poorly,” the answer was simple:
everything is so expensive. When I pressed on what “everything” was, the list came fast —
groceries, gas, plane tickets. The things they actually buy.
That observation is correct. Prices on most of those items are meaningfully higher than
they were a few years ago, and several haven’t come back down. But notice what happened
in the conversation. We started at “the economy is bad” and we ended at “my cost of living
is up.” Those are not the same statement, and the space between them is where most of the
confusion lives.
Three different things keep getting treated as one
The economy is a big collection of measurements — employment, GDP, business
investment, consumer spending. Headline GDP is still positive, though the picture
underneath has gotten uneven.
Your personal cost of living is what it actually takes to keep your life running. This is what
most people feel and call “the economy,” because it’s the part they touch every day.
The stock market is something else entirely. The S&P 500 is a weighted index of 500 large
public companies. Their share prices reflect what investors will pay today for a claim on
those companies’ future earnings. That is a different question than “are my groceries
affordable?”
The market is narrower than the headline suggests
When you hear “stocks at record highs,” it’s worth asking which stocks. According to recent
analysis from Rosenberg Research, just four mega-cap technology companies — Alphabet,
Amazon, Microsoft, and Meta — now account for nearly 20% of the entire S&P 500’s
market value.
Share of S&P 500 Market Value
Small group of AI-focused mega-caps now drives a fifth of the index
Source: Rosenberg Research (May 2026), based on S&P 500 market capitalization data
Those same four companies spent $133 billion on capital expenditures in the first quarter
alone, up roughly 70% from a year ago, almost all of it tied to building AI data centers.
They have projected a combined $725 billion in capital expenditures for 2026.
That is not a broad economic boom. That is an industrial buildout in a small group of
companies, showing up in their stock prices, and pulling the index higher with them.
Meanwhile, the household pressure is real
Here is where the client’s experience gets backed up by the data.
Real personal incomes have fallen in three of the past four months. Strip out government
benefits, and real household incomes are slightly negative year-over-year for the first time
since late 2022.
The personal savings rate has dropped from over 5% to 3.6%. In plain terms, people are reducing their savings to keep their spending up.
The market is narrower than the headline suggests
When you hear “stocks at record highs,” it’s worth asking which stocks. According to recent
analysis from Rosenberg Research, just four mega-cap technology companies — Alphabet,
Amazon, Microsoft, and Meta — now account for nearly 20% of the entire S&P 500’s
market value.
U.S. Personal Savings Rate
Households are reducing their savings to maintain spending
Source: U.S. Bureau of Economics Analysis, via Rosenberg Research (May 2026)
Credit card delinquencies of 90 days or more have reached roughly 12.7% — a fifteen-year
high.
Foreclosure filings hit a six-year high in the first quarter. Gas averaged $4.39 a gallon in
late April.
If any of this rings true for your own household, you are not imagining it. By a lot of
measurable indicators, the consumer side of the economy is genuinely under strain.
So how can both pictures be true at the same time?
The economy has effectively split in two. New York Fed research finds that since 2023, only
high-income households have consistently grown their real spending. The top 1% has seen
real net worth climb more than 25%, while the middle 40% has grown less than 10%.
The same research also found that lower-income households have faced higher inflation
than middle- and upper-income households since late 2022. Their personal cost-of-living
increases have outpaced the headline number reported in the news.
Wages have not kept up either. The Indeed wage tracker has slowed to roughly 2% year-
over-year, and the University of Michigan consumer survey shows people expect just a 0.6% pay increase over the next year. Both are below recent inflation, meaning paychecks are losing ground in real terms.
So the wealth effect from the market is real and concentrated at the top. The cost-of-living
squeeze is real and concentrated everywhere else. Both pictures are accurate. They just
describe different households.
Putting it together
So back to the three things we started with. By the headline numbers, the economy is still
growing. Your cost of living is genuinely higher, and for lower-income households the
squeeze has run ahead of the headline inflation figures. The stock market is at record highs,
but most of that lift is coming from a small handful of AI-focused companies rather than
from broad-based strength.
A strong index does not mean strong household finances. A strained household
environment does not necessarily mean weak markets. Both can be true at the same time,
even when it feels like they shouldn’t be.
A note on what this doesn’t tell us
I want to be careful here. None of what I have written is a forecast about where the market
goes from here. Concentration and consumer strain are conditions, not predictions.
Markets can stay narrow for a long time. AI capital spending may or may not earn the
returns investors are betting on. The household picture may stabilize, or it may keep
tightening. Smart people disagree, and anyone telling you they know what happens next is
selling something.
If any of this raises a question about your own situation or how you are positioned, send
me a note. That is what I am here for.
I’ll catch you next time.
— Phill
Sources
- Rosenberg Research, Rosenberg, May 4, 2026.
- U.S. Bureau of Economic Analysis, Personal Income and Outlays release, March 2026; reported in Rosenberg Research,
Rosenberg, May 5, 2026. - Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit; reported in Rosenberg Research,
Rosenberg, May 5, 2026. - Wall Street Journal, May 2026.
- Federal Reserve Bank of New York, Liberty Street Economics, May 2026.
- Indeed Hiring Lab, Indeed Wage Tracker; reported in Rosenberg Research, Rosenberg, May 5, 2026.
- University of Michigan Survey of Consumers, Q1 2026; reported in Rosenberg Research, Rosenberg, May 5, 2026.
DISCLOSURES
Past performance is not indicative of future results. All S&P 500 annual total returns sourced from Slickcharts (slickcharts.com/sp500/returns), using Robert Shiller/Yale University historical data including reinvested dividends. Additional sources: AAII Journal; Invesco Education Series, Markets in Time of War (2022); Calamos Wealth Management, Geopolitical Events and Market Performance (2022); iSectors, Geopolitical Shock Events and the U.S. Stock Market (2022); Winthrop Wealth, S&P 500 Bear Markets; Yardeni Research, Bull & Bear Market Tables (2024); A Wealth of Common Sense, Geopolitics vs. Markets (March 2026); Citigroup Research Note (June 2025). S&P 500 price data for Bay of Pigs and Lebanon War calculations sourced from Yahoo Finance and Multpl historical data. This newsletter is for informational and educational purposes only. It does not constitute investment advice. All opinions expressed are those of Phill Rademacher, CFP®, and are subject to change without notice. Investing involves risk, including the possible loss of principal. Rademacher Financial, Inc. is a registered investment adviser.
The information presented is believed to be factual and up to date, but we do not guarantee its accuracy, and it should not be regarded as a complete analysis of any topics discussed. All investments and investment strategies have the potential for profit or loss. A professional adviser should be consulted before making any investment decisions. All expressions of opinion reflect the judgment of the authors as of the date of the post and are subject to change. We are not responsible for comments made by third parties. Content should not be viewed as an offer to buy or sell any of the securities mentioned, as personalized financial advice, or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation.
Different types of investment involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. There are no assurances that a portfolio will match or exceed a specific benchmark.
Historical performance returns for investment indexes and/or categories usually do not deduct transaction and/or custodial charges, or advisory fees, which would decrease historical performance results.
