Economists agree: You’re not crazy for feeling like the rich get richer, and the poor are doing worse. Welcome to the ‘K-shaped economy’

It all began with an anonymous Twitter handle named “Ivan the K.” The self-appointed “Lead Independent Director of Finance Twitter” had a dark theory in the depths of the pandemic. In 2020, they asked the universe, “Why is no one talking about a K recovery?” since there was much discussion at that time about an economic bounceback in the shape of either a U, an L, or, most bullish of all, a V. “Some things will bounce back,” Ivan wrote, “some will not recover. Think about it.”

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Economists seem to have thunk on it and agreed: The K is real. It bears similarities to another saying, invented nearly 200 years earlier by the great English romantic poet Percy Bysshe Shelley: “The rich get richer, the poor get poorer.”

This is also called “the Matthew effect,” as some trace the sentiment all the way back to the bible’s Book of Matthew 25:29: “For to everyone who has, more will be given, and he will have abundance; but from the one who does not have, even what he has will be taken away.”

If you ask Mark Zandi, chief economist for Moody’s Analytics, this old-time religion got a new lease on life in the Reaganomics of the 1980s. “You really start to see this in the Reagan era,” Zandi told Fortune. “That’s when you get a structural divergence between productivity growth and median wage growth.”

Zandi argued many elements combined then to weaken labor in favor of capital income: globalization, the decline of unions and manufacturing and major tax reforms. “The share of national income going to labor has been trending down since the early 1980s,” he said, “and the share going to capital owners—those who already have wealth—has gone up.”

So what is it about 2026, six years after the pandemic severed something economically, that accelerated both sides of the “K” for the wealthy and the poor?

Data doesn’t lie

First, consider the extraordinary surges in economic data seen, halfway through the 2020s. The stock market rallies have led to several record highs in 2025, incentivizing the (wealthier) Americans with money in the markets to loosen their purse strings. But the bottom half of the K is extending downwards, with fast-casual restaurants like Chipotle and Cava, and fast-food joints like McDonald’s, noting that lower-income customers, especially young people, are pulling back and preferring to dine at home.

Zandi’s own research has turned up some stunning results, notably that in the second quarter of 2025 the top 10% of wealthiest Americans were responsible for a whopping 49% of consumer spending. That means the economy has grown so lopsided—or K-shaped—that the richest Americans are responsible for half the economy. The K-shape is creating the illusion in economic data that despite sticky inflation and tariff-related sticker shock, consumer spending remains “resilient.”

Morgan Stanley Wealth Management’s Lisa Shalett has increasingly been sounding the alarm from her perch as chief investment officer. She told Fortune in an October 2025 interview “the income inequality stuff is really getting like completely wackadoo,” specifically citing Zandi’s research: “That means 90% of the country is only half the consumption, I mean holy cannoli.”

Shalett covered the K-shaped economy specifically in a November 2025 research note, in the context of whether 2026 marks an early or late stage of the economic cycle for investors. “Decoding this conundrum may hinge on the so-called K-shaped economy,” she wrote, “a concept that captures the widening chasm between the ‘haves’ and ‘have-nots.’”

Then Shalett said the situation is actually even worse than what Zandi produced: “For the U.S. consumer, wealth concentration has produced a situation where the top 40% of households by income account for approximately 60% of all spending; those households, in turn, control nearly 85% of America’s wealth, two-thirds of which is directly tied to the stock market, which has climbed more than 90% in three years.” She calculated that spending by the wealthiest households was growing 6x-7x faster than for the lowest cohort.

Even Federal Reserve chair Jerome Powell talked about seeing the pattern at last December’s Federal Open Market Committee meeting. “We hear about this a lot,” Powell said. “If you listen to the earnings reports for consumer-facing companies that tend to deal with low- and moderate-income people, they’ll all say that we’re seeing people tightening their belts, changing products that they buy, buying less, and that sort of thing. And so it’s clearly a thing.”

When did the K-shaped economy emerge?

The concept of a bifurcated economy has been baked into American society longer than even the days of Reagan, according to Tyler Schipper, associate professor of economics at the University of St. Thomas.

“There’s this underlying thing that has been true for decades and decades and decades,” Schipper told Fortune. “Number one, lower income households always struggle more in the economy. They tend to be more impa