In business, the 80/20 rule states that 80% of your business will come from 20% of your customers. In an economy where roughly 2/3rds of the growth is driven by consumption, a growing “wealth gap” presents a major headwind.
As shown in the chart below, while asset prices were inflated by continued interventions of monetary policy, it only benefited the small portion of the population with assets invested in the market. Cheap debt, excess liquidity, and a buyback spree led to soaring Wall Street and corporate profits, surging executive compensation, and rising incomes for those in the top 1%. Unfortunately, the other 99%, known as “Main Street,” did not receive many benefits.
This divide is seen in various data, and survey statistics, such as the recent survey from the National Institute On Retirement Security which showed the distribution of assets by household where the top 25% of baby boomers owned 91% of the total.
These statistics show the warning we gave…