In a note shared with Fortune, published earlier this week, Zandi wrote households raking in $200,000 or more a year were powering overall spending. In the year ending Q1 2026, outlays by this top fifth percentile grew by 6.5%—or 4% after inflation.

Meanwhile, outlays for the bottom 80% were unchanged once inflation is taken into account, Zandi notes: “This gap has persisted since the pandemic, which helps explain why most Americans are upset about their financial situations and the broader economy’s performance.”

This might explain the gap between economic data and consumer perception. The U.S. economy is, by many measures, faring pretty well: Unemployment is holding relatively steady, GDP increased at an annual rate of 2.1% in the first quarter of 2026, and while inflation remains elevated, consumers are still spending.

However, DC’s midterm battle may come down to affordability—a lightning rod as voters continue to push for relief for their wallets.

“The K-shaped economy—with the well-to-do thriving and everyone else lagging—remains firmly intact, and there is no sign that the trend line will reverse soon,” Zandi adds. Moody’s analysis of Fed personal finance data shows that, since the pandemic, personal outlay growth for the bottom 80% has been 4.5%, barely ahead of inflation at 3.9%. Meanwhile, the top 20% have increased their spending by 8.3%.

Balancing a bubble

While it’s good news that there is some growth in consumer spending, Zandi is cautious about the extent of the reliance on the wealthy cohort—especially because their wealth is derived from the stock market, where bubble questions are rife.

Zandi says a similar phenomenon was observed in the late 1990s: “This reflects the wealth effect, which holds that changes in household wealth affect consumers’ willingness and ability to spend. If wealth increases, as it has over much of the past decade, consumers spend more of their income and the cash generated from capital gains realizations.”

The vast majority of these assets are owned by the wealthiest Americans, Zandi adds, citing the Fed’s distributional accounts, which show almost 90% of corporate equities and mutual funds are held by those in the top 20% of the income distribution— a factor which has become more highly skewed in recent years.

Is this a bubble? Zandi writes that elements of the market are “overvalued, bordering on speculative,” adding: “Given how important the well-to-do are to spending and the economy, and the importance of surging stock prices to the well-to-do, it is critical to consider the durability of the runup in stock prices. Based on historically tried-and-true measures of stock market valuation, there are reasons to be nervous.”

Price-to-earnings multiples are “sending up yellow, if not red, flares,” he writes, given their reading of 19x. “It would be an overstatement to call the current stock market a bubble, but the warning signs are accumulating,” Zandi notes.

“To be sure, AI stock prices have soared for strong fundamental reasons, as AI promises to be a game-changing technology. But they have also received a big boost from index funds that must buy AI stocks simply because those companies have become a larger share of the index.”

As such, Zandi suggests consumer spending is far more tenuous than it appears on the surface, and if “everything sticks to script,” then wealthy consumers and the broader economy will be fine. However, “It is not hard to envisage an alternative scenario in which the stock market stumbles, prompting this group to become more cautious in their spending and causing the broader economy to struggle.”