Aug 11, 2026
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Add us on GoogleUnited States Treasury Secretary Scott Bessent recently appeared on CNBC, where he revealed that he thinks the U.S. is no longer in a K-shaped economy.
“I got sick of hearing about this K-shaped economy,” he told CNBC’s Joe Kernen. “I can say here definitively, the K-shaped economy is over.”
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Other economists aren’t so sure. As recently as June, Moody’s chief economist Mark Zandi had the exact opposite opinion.
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“The K-shaped economy remains firmly intact,” Zandi said in an X post. “Americans in the top 20% of the income distribution (those who earn over $175k annually) account for an astounding nearly 60% of outlays.
The two economists used two different metrics to reach their conclusions. Here’s what to know about both methods — and what it means for your portfolio.
Wage growth vs. outlays
In the CNBC interview, Bessent said that the U.S. economy is now a “C economy,” arguing that “the lower end of wage earners are finally calling it back.” He said the bottom 25% of earners are currently experiencing year-over-year wage growth of 5.5%, three times more than the top 25%.
According to the Federal Reserve Bank of Atlanta, the bottom 25% of earners had a moving average of median wage growth of 3.6% in June 2026, lower than any other quartile. The bottom 25% of earners have had the lowest median wage growth of all quartiles each month since October 2024.
Instead of using wage growth, Zandi used the Fed’s Financial Accounts and Survey of Consumer Finance to determine the outlays of both the top 20% and the bottom 80% to make his K-shaped economy calculations.
Outlays are people’s expenditures. Moody’s methodology defines personal outlays to include “consumer spending, interest payments on consumer installment debt and transfers such as donations.”
According to Zandi, the top 20% and bottom 80% spent roughly similar amounts in the 1990s. By the 2000s, the top 20% had started accounting for a larger percentage of spending. The gap between the two groups’ outlays has been expanding ever since.
Zandi’s graph shows that the top 20%’s outlays increased by 6.5% over the past year — significantly above the CPI inflation rate of 2.7%. In comparison, the bottom 80% spent slightly less than inflation, suggesting their budgets may have been struggling to keep up with rising prices.
“No wonder most Americans are upset with their financial situations and the broader economy,” Zandi said in the X post.
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Diversify by catering to both arms of the K
If you’re worried about protecting your wealth in a K-shaped economy, having a portfolio is a great start. Assets tend to perform significantly better than labor when the economy splits.
“If you’ve already accumulated wealth, you’re a member of the upper K, and the reason you’re doing OK is because you almost certainly have significant exposure to the financial markets,” Deon Strickland, a professor of finance at Wake Forest University and former SEC economist, told Forbes.
Making regular contributions to your investment portfolio is important to continuing to build wealth. So is diversification, especially as the wealth divide grows deeper.
Investing in both cyclical assets — investments or goods that tend to do well when the economy is strong — and countercyclical assets — investments or goods that tend to do well when the economy is weak — can help keep your portfolio balanced no matter what comes next.
An example of a countercyclical asset might be stock in a budget store like Dollar Tree — something that people may turn to when they’re trying to spend less. These investments cater to the lower part of a K-shaped economy, while your other, cyclical assets are geared toward the upper half.
Diversification is of utmost importance even outside of a K-shaped economy. You never know what the future has in store, and you don’t want to be caught unprepared.
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Kit Pulliam is a DC-based financial journalist with over five years of experience writing, editing and fact-checking financial content.
