1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 64
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
Equities account for an increasingly large share of assets held by the top 20% of earners
50%
40%
30%
20%
10%
0%
1989
1994
1999
Recession
2004
2009
2014
2019
2024
Equities as a share of assets (top 20%)
Source: Fed Distribution of Financial Accounts, Scotia Wealth Management
This has contributed to growing discussion around a K-shaped economy, in which outcomes for
higher- and lower-income households have increasingly diverged. The upper leg of the ‘K’ is
represented by the top 20% of income earners whose balance sheets have benefitted from equity
and asset price appreciation, while the lower leg reflects the bottom 80% whose financial position
is more closely tied to employment conditions and real income growth.
It is important to note that consumption has never been evenly distributed across income groups.
Historically, higher income households have accounted for a disproportionate share of total
spending, owing to higher absolute incomes and stronger balance sheets. Data from the
Consumer Expenditure Survey (CEX) show that the top income quintile has consistently
accounted for 35-40% of total consumption over time. However, the degree of consumption
concentration may be even higher than indicated by the CEX given that it may under-represent
affluent households, leading to an understatement of both income and spending at the top of
the income distribution.
If instead we look at the Fed’s Survey of Consumer Finances (SCF), which provides more
comprehensive coverage of affluent households, we find substantially higher income
concentration at the top of the distribution. Using SCF data, we can see that the top 20% of
earners account for roughly 60% of the income share as at 2022, up from the mid-50% level seen
during the 1990s. This suggests that standard expenditure surveys may materially understate the
role of higher income households in driving aggregate spending.
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