The U.S. economy may not be as divided as the popular "K-shaped" narrative suggests. Economist Ed Yardeni says a generational divide better explains why consumer spending has remained resilient.
Yardeni, a longtime Wall Street economist and founder of Yardeni Research, calls this the "G-shaped economy." In an Aug. 3 research note, he argued that older Americans have accumulated far more wealth than younger generations, while financial support from older households is helping younger Americans cope with affordability pressures.
What Is A G-Shaped Economy?
The K-shaped economy describes a widening gap between higher- and lower-income Americans, with the two groups experiencing different trends in income, spending and wealth. Recent debate has focused on whether that divide is still widening or beginning to narrow.
Yardeni offers a different explanation. He argues that consumer spending is resilient largely because of a generational wealth divide: older Americans are significantly wealthier than younger Americans, but they are also helping younger family members financially.
That matters because consumer spending is the largest component of GDP. It grew at a 3.2% annualized rate in the second quarter, up from 0.5% in the first quarter, while consumer spending contributed 2.1 percentage points to Q2 GDP growth.
Boomers Control Most Of The Wealth
Baby Boomers had nearly $90 trillion in net worth as of the first quarter of 2026, representing about 52% of total U.S. household wealth. The Silent Generation held another $20 trillion, much of which Yardeni expects eventually to pass to their Boomer children.
That concentration of wealth means consumer spending is increasingly supported by accumulated retirement wealth rather than labor income.
The wealth effect can also support spending without a corresponding jump in wages.
Boomers Own More Financial Assets
Boomers control approximately 54% of household corporate equities and mutual funds, worth nearly $30 trillion. They also own approximately 41% of household real estate wealth, the largest share of any generation.
Rising stock and home prices can therefore strengthen the balance sheets of a generation that already holds a large share of those assets.
Higher Rates Work Differently
Boomers hold roughly $3.1 trillion in money-market funds, or about 60% of all household money-market assets. The Silent Generation holds another 16%.
Higher rates can therefore generate more interest income for older households. Many Boomers also either paid off their mortgages or locked in historically low rates.
Despite holding more than half of household net worth, Boomers account for only 22% of total household liabilities, 19% of household consumer credit and 18% of mortgage loans.
Older homeowners are also less likely to sell when doing so means giving up a low mortgage rate. That can limit housing supply while supporting home prices and home equity.
The financial position of older Americans, including their mortgage debt and potential wealth transfer to younger generations, is another part of the broader generational wealth picture.
Boomers Depend Less On Jobs
Many Boomers are retired or approaching retirement, so their spending is less dependent on wage growth, hiring or job security.
Their financial position is increasingly tied to stocks, homes and interest income, rather than just paychecks.
Younger Americans face a different reality. High home prices, mortgage rates and limited affordability have made it harder for younger generations to enter the housing market.
Wealth Can Flow To Younger Generations
The G-shaped economy does not mean Boomers are simply spending their wealth on themselves.
Yardeni argues that older households can also support their adult children when younger Americans face financial or employment pressures. The eventual transfer of wealth from older generations could further strengthen younger households.
That is why Yardeni sees the economy as generationally divided rather than simply divided between rich and poor.
Why The G-Shaped Economy Matters
Yardeni’s argument is ultimately about why consumer spending has remained resilient despite affordability pressures facing younger Americans.
The debate over the K-shaped economy helps put the idea in context. Treasury Secretary Scott Bessent has argued that the K-shaped divide is fading, while economists including Robert Reich and Mark Zandi have offered a different view.
Yardeni’s G-shaped economy focuses on a different dividing line: generations. Older Americans hold a disproportionate share of household wealth, are less dependent on labor income and can provide financial support to younger generations.
That generational flow of wealth, according to Yardeni, helps explain the resilience of consumer spending.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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