The K-Shaped Economy and What It Means for Your Portfolio

The Data Behind the K-Shaped Economy is Real

The top decile of households now accounts for roughly half of all consumer spending, which is a record. Luxury travel is booked solid. Premium cabins on airlines are sold out. At the same time, lower-end retailers and quick-service restaurants are saying their customers are stretched.

Before you make portfolio changes based on this information, remember that markets are forward looking. By the time a narrative is in the media, it is already reflected in stock prices. Compelling stories and compelling investments are usually two different things. The story tells you what has happened. The price tells you what the market expects to happen next.

What Should You Do About the K-Shaped Economy?

First, recognize that your financial plan was not built around a single macroeconomic storyline. It was built around your goals, your time horizon, and your tolerance for risk. A K-shaped economy does not change any of that.

Second, stay diversified. We own companies on both sides of the K, here and abroad, large and small, value and growth. That is by design. We do not need to predict which side wins.

Third, if the headlines are making you anxious, that is a signal to talk with your advisor, not to make a drastic change to your portfolio.

Conclusion 

The economy will keep doing what economies do. It will surprise us in both directions. Our job is not to react to every twist in the story. Our job is to keep you invested in a portfolio you can stick with no matter what happens in the economy or in the markets. 

If you have any questions on anything covered in this video, please don’t hesitate to reach out to your advisor.

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