If you ever heard about the wealth gap, it exists and often it is stated as the difference in public companies the difference between the base salary of the CEO and the base salary of an average employee wage. Over the past few decades, it has become larger as opposed to the 1950’s. Whether that is good or bad, it is what exists.

In an article from the Associated Press, the notion of a K shaped economy where the priorities for each stroke of the K are being different. The upper stroke of the K is the higher-income Americans, who typically have a college degree, has ramped up spending more quickly than other consumers. The lower-income and more rural households faced higher inflation than the higher-income households. The study from the Federal Reserve Bank of New York, focus on goods, excluding autos, and does not capture likely-spending by higher-income households on travel, restaurants and entertainment.

The K shaped economy is the upper-income Americans are fueling a disproportionate share of consumption that is the primary driver of the economy, while lower-income households see fewer gains. Poorer households in general often experience higher inflation, with a greater share of their spending being set aside for goods such as housing, groceries, and utilities.

The New York Fed’s data show households with incomes above $125,000 have boosted their spending 2.3% middle-income households between $40,000 and $125,000 have increased their spending by 1.6% and those under $40,000 increased their spending by 0.9%.

The New York Fed works with the analytics firm Numerator which tracks about 200,000 consumers on a monthly basis.

Linking to dividend paying stocks, as an investor you want to know who does your companies appeal to. Are they middle and upper or the broad base? Then you need to know the middle is always squeezed, how much room do they have? What will they spend on? As you go through your investments, you can see how a K shaped economy affects your companies.

There are more questions than answers, till the next time – to raising questions.