The economic system is a story of two halves at current, with rich shoppers reporting confidence of their outlook, whereas these on the decrease finish of the revenue ladder reportedly really feel they’re residing in a recession—albeit with out widespread job losses.
That is what economists are calling a ‘K-shaped economy,’ the place the fortunes of two distinct units of shoppers are more and more diverging over time.
A part of this rising divide between the wealthy and the common employee may also be traced again to the place these households derive their wealth—particularly from their publicity to the booming inventory market of 2025.
Markets in Europe are additionally up throughout the board in early buying and selling, with Germany’s DAX, France’s CAC 40 and Spain’s IBEX 35 all up by greater than 1%. In London, the FTSE 100 is up 0.7%.
As Moody’s chief economist, Mark Zandi, highlighted in a be aware yesterday: “It’s laborious to overstate the importance of the hovering inventory costs of synthetic intelligence corporations to the economic system. Spending by well-off People, pushed by their surging inventory portfolios, is the only most important driver of progress.
“This so-called wealth effect is responsible for nearly half a percentage point of real GDP growth over the past year, accounting for one-fourth of the economy’s overall growth.”
Zandi has beforehand argued that the prospects of the economic system are hinged on the fortunes of the rich, and added in his be aware this weekend: “It is prudent to consider how sustainable this is. And if it isn’t, what does it mean for future growth?”
The wins and the potential for future success are additionally changing into more and more concentrated, in line with analysis from the Apollo Academy.
A be aware final week from chief economist Torsten Slok titled ‘K-Shaped Economy for Firms’ outlined how, since earlier in 2025, earnings expectations have elevated for the Magnificent Seven and declined for the S&P 493. The Magnificent 7 are a gaggle of American family names (Apple, Amazon, Google proprietor Alphabet, Meta, Microsoft, Nvidia, and Tesla) which have doubled down on AI—not solely deploying it inside their very own companies and bringing new merchandise to market, but in addition investing within the infrastructure wanted to construct out the transformative know-how.
For instance, a graph charting the 2025 EPS consensus estimates for the S&P 500 between October 2025 and April 2025 reveals that estimations, on common, have dropped by roughly 0.2%.
Nonetheless, consensus estimates for the Magnificent 7 have elevated by somewhat below 4% between October and April, whereas the remaining 493 shares within the S&P 500 have dropped by roughly 1.5%.
Right here’s a snapshot of the markets forward of the opening bell in New York this morning:
- S&P 500 futures are up 1.07%.
- The STOXX Europe 600 is up 1.25%.
- The U.Okay.’s FTSE 100 is up 0.7%.
- Japan’s Nikkei 225 was up 1.26%.
- China’s CSI 300 was up 0.35%.
- The South Korea KOSPI was up 3.02%.
- India’s NIFTY 50 is up 0.32%.
- Bitcoin was up at $106K.
