The resilience of consumer spending, despite weak employment growth, is driven by affluent consumers liquidating assets or drawing down cash. This balance sheet-driven consumption explains why traditional income-based models (like savings rates) are failing to predict a slowdown.

While high-income spending remains stable, the next wave of consumption growth will stem from a recovery in the middle-income segment. This rebound will be driven by stabilizing factors like reduced policy uncertainty and neutral monetary policy, not a major labor market acceleration.

The true signal of a recession is not just falling equities, but falling equities combined with an aggressive bid for long-duration bonds (like TLT). If the long end of the curve isn't rallying during a selloff, the market is likely repricing growth, not panicking about a recession.

There are two distinct economies operating simultaneously. Those with a capital base (equities, real estate) can use financial engineering and leverage to thrive. Meanwhile, individuals relying solely on wages are being crushed by inflation, as their income fails to keep pace with rising costs.

Market participants are conditioned to expect a dramatic "Minsky moment." However, the more probable reality is a slow, grinding decline characterized by a decade of flat equity prices, compressing multiples, and degrading returns—a "death by a thousand cuts" rather than one catastrophic event.

The U.S. economy can no longer be analyzed as a single entity. It has split into two distinct economies: one for the thriving top tier (e.g., AI and tech) and another for the struggling bottom 60%. The entire system now depends on spending from the rich; if they stop, the economy collapses.

Large-cap tech earnings are hitting record highs, driving stock indices up. Simultaneously, core economic indicators for small businesses and high-yield borrowers show they have been in a recession-like state for over a year, creating a stark divergence.

The top 10% of earners, who drive 50% of consumer spending, can slash discretionary purchases overnight based on stock market fluctuations. This makes the economy more volatile than one supported by the stable, non-discretionary spending of the middle class, creating systemic fragility.

The top 10% of US earners now drive nearly half of all consumer spending. This concentration suggests the macro-economy and stock market can remain strong even if AI causes significant unemployment for the other 90%, challenging the assumption that widespread job loss would automatically trigger an economic collapse.