America’s Biggest Risk Might Be Its Booming Stock Market

​The Market That Could Break the Economy
The U.S. economy’s biggest threat isn’t tariffs or credit stress — it’s the stock market itself. After adding nearly $9 trillion in equity value over the past year, those gains have fueled high-income spending and kept growth alive. But if markets tumble, that wealth-driven spending could dry up fast.

“The surge in stock prices is so key to the well-to-do who are driving consumer spending,” said Mark Zandi, chief economist at Moody’s Analytics. “If that turns into reverse and stock prices decline, that’s the real threat to the economy in my mind.”

Moody’s estimates the top 10% of earners are responsible for half of all consumer spending. That concentration of economic power means any sharp correction on Wall Street could send a chill through the broader economy.

The Wealth Divide Grows Wider
Even as inflation and tariffs squeeze middle- and lower-income households, the affluent continue to spend — for now. Deborah Weinswig, CEO of Coresight Research, said the divide between high- and low-income consumers is the widest since early 2020. Wealthier shoppers are splurging on luxury goods, while lower earners stretch paychecks by shopping at discount stores and stacking coupons.

“We continue to see the middle consumer being really squeezed,” Weinswig said. “The winners are on the extremes — the discounters and the true luxury brands.”

Retailers benefitting most include Walmart, Costco, BJ’s, and Sam’s Club, all of which attract both bargain hunters and affluent shoppers seeking value. On the other side, discount giants like TJX, Ross, and Burlington are thriving as customers trade down.

A Risky Reliance on the Rich
Zandi warned that markets have become “overvalued, bordering on frothy,” and any pullback could rattle confidence among wealthy consumers — the group propping up U.S. growth. “Of all the risks out there, from what’s going on in the banking system to the government shutdown, that’s the one at the top of my list of worries,” he said.

The risk is that the same investors fueling record market highs could be the first to pull back if sentiment shifts. And with corporate profits already slowing and borrowing costs still high, a drop in high-income spending could trigger a much broader slowdown.

Cracks Begin to Show
Evidence of stress is already surfacing. Deloitte’s 2025 holiday retail survey found that overall spending is expected to fall 10% from last year, with consumers across all income brackets cutting back. Even households earning more than $200,000 a year are becoming cautious, with one in four now looking for cheaper alternatives or delaying purchases.

“It’s a sign that even the top of the consumer pyramid — the group keeping the U.S. economy afloat — could be nearing a breaking point,” said Mike Daher, Deloitte’s vice chair.

The Bottom Line
​Wall Street’s relentless rally has become a double-edged sword. The same boom that’s been fueling America’s growth could turn into its biggest vulnerability — and if stock portfolios start flashing red, the economy might not be far behind.