Wall Street is wary of stocks beating the economy

What they're saying: "Income inequality has increased greatly in recent years," writes David Kelly, chief global strategist with J.P. Morgan Asset Management.

• Richer consumers have far more savings, and far more of those savings flow into stocks, he notes.

Threat level: A major pullback in stock prices could quickly curb the spending of the wealthy, weakening a main pillar of the economy.

• "Changes in asset prices may have a greater effect on consumption in 2026 than they have in the past," notes Dirk Hofschire, managing director of the asset allocation research team at Fidelity Investments, "and they might even outweigh economic data from other segments of the economy in terms of their impact on consumption."
• This is part of the concentration problem we wrote about this month: When both market gains and consumer spending rely on the same narrow slice of households, the backdrop becomes riskier.

Zoom in: Part of what drives spending among richer Americans is the wealth effect, the idea that you spend more when your asset prices rise even though technically you have not gained any more money.

• If the market falters, rich people will not feel so rich. And the wealthy are now responsible for half of consumer spending, according to Moody's.

By the numbers: Kelly cites tax return data that showed by 2022, the top 10% of families received more than 52% of income.

• The same top 10% of households save 33% of their after-tax income while the other 90% of earners save 2%. More of those high-income savings end up in the stock market, giving equities a steady inflow.

The bottom line: The stock market keeps hitting records even as the economic vibes feel gloomier.

• That divergence could become a problem if anything dents the one group holding it all up: the wealthy.

Editor's note: This story has been updated to identify the author of the Fidelity outlook.