Don’t Get Kicked by the K-Shaped Economy

Today’s economic environment is historically unusual.

GDP growth is above 4 percent, while global stock markets have hit all-time highs. Meanwhile, the Consumer Confidence Index declined for a fifth consecutive month in December and sits near lows not seen since the early days of the pandemic. What gives?

Economists have taken to describing the current economy as K-shaped. Like the letter K, you’ve got two offshoots. The upward trajectory is occupied by asset owners who enjoy wealth creation through public and private markets. The downward trajectory is felt by ordinary people subject to rising prices and a weak labor market. Inflation has cooled from its peak but prices remain high in key household categories. And the labor market continues to soften.

The average price of a dozen eggs was around $1.50 nationally just five years ago. This price has increased to more than $2.70 as of the most recent Consumer Price Index reading. Homeowners’ insurance has risen more than 14 percent since the end of 2022. New car prices jumped 20 percent between 2021 and 2023 and have not come back down. Across the economy, we are seeing stubbornly high prices.

These rising costs come alongside a labor market in which it is harder and harder to find a job. Since the spring of last year, we’ve seen little to no growth in total employment. We’ve entered a “no hire, no fire” labor market where companies aren’t laying off aggressively but also aren’t creating new opportunities. The labor market is not as healthy as what we saw for several years coming out of the pandemic.

These facts are not lost on us. According to Dana M. Peterson, chief economist for The Conference Board, “Despite an upward revision in November related to the end of the shutdown, consumer confidence fell again in December and remained well below [2025’s] January peak. Four of five components of the overall index fell, while one was at a level signaling notable weakness.”

Despite these obviously negative economic realities, the stock market continues to hit new all-time highs. Global luxury goods sales grew at about 10 percent per year from 2019 through 2023 and remained high through 2024 and 2025. Rolex reported 11 percent sales growth in 2023 and surpassed $10 billion in revenue. Although growth in luxury sales have levelled off since the post-pandemic surge, sales levels remain historically high.

Billionaires are wealthier than they’ve ever been, while average people are feeling generally lousy about their financial situation. This dichotomy exemplifies the K-Shaped economy.

Don’t Get Mad at the K-Shaped Economy. Get Even.

How can you avoid getting kicked by the K? Own the assets.

I know it sounds counterintuitive, but the only way to keep up is to own the assets that are contributing to wealth creation. Thankfully, there is an easy way to gain access to these assets: You can buy the stock market through simple, inexpensive vehicles such as exchange-traded funds (ETFs) and mutual funds.

In my experience as financial advisor, stock market ownership is a major differentiator between people who are getting by and those who are thriving. I don’t mean to oversimplify, but there is a tendency for many hardworking professionals—homebuilders, electricians, teachers, police officers, you get the idea—to avoid the stock market in favor of more certainty. I can’t tell you how many people have come to me with six-figure amounts in bank CDs earning 3 or 4 percent. They’re generating income and savings, but they’re not using those savings to really grow their wealth.

Of course you want a safety net, and this isn’t a call to speculate or abandon prudence. But avoiding the stock market risks leaving you on the lower trajectory of the K. If you had earned a 17 percent return on your savings last year, wouldn’t you feel a little better about the economy?

The University of Michigan’s Consumer Sentiment Survey sits about 25 percent below last January’s reading, with respondents most commonly citing high prices and softening labor markets. Declines in confidence have been widespread across different age groups, income brackets, and political affiliations.

But not for everyone. According to the survey’s director, Joanne Hsu, “One key exception: consumers with the largest tercile of stock holdings posted a notable 11 percent increase in sentiment, supported by continued strength in stock markets.”

Billionaires tend to share one thing in common—they own equity. Elon Musk’s wealth is driven by Tesla stock, Warren Buffett by Berkshire Hathaway, Jeff Bezos by Amazon, Mark Zuckerberg by Facebook. And you can own all these companies too. If you can’t beat them, maybe it’s time to join them.

This article originally appeared in the Berkshire Business Journal.