The

United States economy

in late 2025 presents a paradox. Headline

gross domestic product

(GDP) growth appears robust: The Federal Reserve Bank of Atlanta’s

GDPNow

estimate for the third quarter pegs growth at 3.9 per cent annualized. Yet beneath the surface, the picture is far less reassuring.

Economic

conditions are deteriorating

, according to David Rosenberg, founder and president of Rosenberg Research and Associates Inc.

Rosenberg Research analysis of the Federal Reserve’s most recent

Beige Book economic data

for October indicated that only 18 per cent of the economy is growing, Forbes noted. That is down from 43 per cent in August and 100 per cent at the end of 2024.

So what’s driving the disconnect between positive national growth numbers and 82 per cent of America experiencing underlying pain?

The top 10 per cent are propping up consumption

Consumer spending, the lifeblood of the U.S. economy, is increasingly concentrated among the affluent. The

top 10 per cent

of earners (those with income greater than US$250,000) now account for approximately half of all consumer spending, up from 36 per cent three decades ago. This means economic resilience depends disproportionately on households with significant equity exposure and soaring home values.

As

Ben Carlson at Ritholtz

Wealth Management said, the top 10 per cent of Americans own 87 per cent of the stock market, while the top one per cent alone own half of all stocks. The bottom 50 per cent own just one per cent of the market.

The wealth divide has exploded since 2020. According to non-profit Oxfam International’s most recent numbers available, the richest one per cent captured nearly

two-thirds of the US$42 trillion

in new wealth created between 2020 and 2022, almost twice as much as the bottom 99 per cent of the global population. Over the past decade, the richest had captured around half.

In the U.S., the top 0.1 per cent nearly

doubled their wealth

from US$12 trillion to about US$23 trillion, while the bottom 50 per cent gained just US$2 trillion combined. Today, the top 0.1 per cent controls

14 per cent

of total U.S. wealth, up from nine per cent in 1990. This concentration amplifies market sensitivity: When the wealthy spend or invest, asset prices surge; when they pull back, the economy feels the shock. Their dominance in equities means monetary policy disproportionately affects this cohort and not the broader population.

Meanwhile, the

bottom 50 per cent

has seen its share of net worth shrink. In 1989 they held 3.5 per cent of total U.S. net worth; today, that figure is just 2.8 per cent. For these households, low gasoline prices and affordable essentials aren’t luxuries, they’re survival tools. This bifurcation is fuelling political polarization, exemplified by the polling showing public support behind a far-left mayor in New York, a sign of growing frustration among those left behind.

AI spending masks economic weakness

Strip away

AI

-related investment, and the economy looks anemic. AI and data centre spending accounted for

92 per cent of U.S. GDP growth

in the first half of 2025, even though these sectors represent only about four per cent of total GDP. Without this surge, growth would have been a mere 0.1 per cent annualized, according to Harvard economist

Jason Furman

.

This spending spree is not just powering GDP, it is inflating stock valuations and creating a rising liquidity tide that lifts risk assets, which is great for the small percentage of people who own the majority of the equity market.

But for those living on Main Street, the AI boom is a double-edged sword. Traditional employers are cutting jobs. United Parcel Service Inc. has eliminated 48,000 positions in 2025, far above its earlier target of 20,000, as automation reshapes logistics.

Amazon.com Inc.

is slashing 14,000 corporate roles, with more cuts tied to AI-driven restructuring. Target Corp. plans to cut 1,800 jobs, and General Motors Co. has announced layoffs as well.

These job losses hit middle-income earners, the very group that drives discretionary spending, and further widens the gap between economic winners and losers.

Even consumer staples giants are feeling the pressure. The Kraft Heinz Co. is feeling the effects of the broader U.S. economic slowdown in 2025, particularly in its North American operations. Despite headline GDP growth, the company has lowered its annual sales and profit forecasts, citing weakened consumer demand and persistent inflation.

In essence, Kraft Heinz’s performance is a microcosm of the broader U.S. recessionary undercurrents: headline growth driven by narrow sectors such as AI and elite consumption, while mainstream consumer brands face declining volumes and profitability. The company’s strategic pivot, including a

major corporate split

and aggressive promotional spending, underscores the challenges ahead in a polarized and inflation-weary economy.

What it means for investors

Don’t be fooled by headline GDP numbers. The U.S. economy is riding a narrow wave of AI-driven capital expenditure and elite consumption, while regional recessions and structural inequality deepen. This concentration creates both opportunity and risk.

Tech infrastructure plays, including semiconductors, cloud providers and data centre REITs, remain attractive but they are vulnerable to any slowdown in AI spending. Consumer discretionary tied to affluent households may outperform, while mass-market retail faces headwinds from layoffs and weak wage growth. Housing remains bifurcated: Luxury markets and services catering to the wealthy may be resilient but affordability challenges will pressure mid-tier segments.

Personally, I’m increasingly concerned about the political risk emerging from this economic divergence. The growing chasm between the economic elite and the broader population is fuelling populist movements on both the left and right, each pushing for radically different solutions, from wealth redistribution and aggressive taxation to protectionism and anti-establishment deregulation. This polarization is already reshaping fiscal policy debates, tax structures and regulatory frameworks, and it’s only accelerating.

There is a real risk of a modern-day “let them eat cake” moment, where the economic and political elite underestimate the frustration brewing among those left behind. When the majority of Americans feel excluded from prosperity, the potential for social unrest, policy whiplash, and unpredictable election outcomes rises sharply. We’re already seeing signs of this in the form of extreme candidates gaining traction, cities electing far-left leadership and growing hostility toward institutions.

Global investors should prepare for volatility not just in markets but in their everyday lives. Policy uncertainty, social tension and fiscal shifts could affect everything from interest rates and capital flows to housing affordability and business investment. In this environment, portfolio resilience requires more than just diversification; it demands a deep understanding of the political landscape and its potential to disrupt economic fundamentals.

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Martin Pelletier, CFA, is a senior portfolio manager at Wellington-Altus Private Counsel Inc., operating as TriVest Wealth Counsel, a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax, estate and wealth planning. The opinions expressed are not necessarily those of Wellington-Altus.

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