The K-shaped economy went mainstream this month. NPR, CNN, CBS, and Fox Business all ran explainers. U.S. Bank published a research note. The phrase appeared in Federal Reserve commentary. Everyone agrees America is splitting into two economies — one rising, one sinking.
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But the coverage stops at income data and spending percentages. It confirms the K exists. It doesn't show you how people are actually living it.
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Consumer sentiment is down 25% since January 2025. However, researchers at the University of Michigan found a paradox in the wreckage: confidence is falling among high earners and rising among low earners. That's not recovery. That's the top of the K getting nervous while the bottom adapts to permanent precarity.

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Bank of America data shows the wage growth gap is now the widest in a decade — 4% annual growth for the top third of earners, 1.4% for the bottom third. The top 10% of households now account for nearly half of all consumer spending. Meanwhile, 22% of Americans with credit card debt say they will never escape it. Not "struggle to." Never.
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This report maps the behavioral divide. Two populations: One investing in the future, the other focused on making it to their next paycheck, and hoping it isn’t their last.

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25% one-year drop in consumer sentiment, with high earners declining faster than low earners.

4% vs. 1.4%: Wage growth disparities between high- and low-income households — the widest in 10 years.

22% Americans with credit card debt who believe they will never escape it.

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Life on Opposite Sides of the K

TOP OF THE K — THE WEALTH BUILDERS

In 2025, the stock market hit record highs, and Wealth Builders felt it as they watched their 401(k)s and brokerage accounts soar. They trust their financial advisors from Schwab, Merrill, or J.P. Morgan, who advise them during volatility. Risk and worry are professionalized. They have a full insurance portfolio in case of unexpected events, so that bumps in the road are planned for, even if painful. They’re renovating their kitchen, inspired by a TikTok video, investing to increase the value of their home while enjoying the space long-term. When gambling, they set limits, viewing it as an entertainment expense, with money allocated for it. Overall, their approach is one of careful management; they see the future as a project they’re actively working on.

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BOTTOM OF THE K — THE MARGIN SURVIVORS

In 2025, Margin Survivors missed the stock market boom. Many don't own stocks or have much cash left from retirement plans. They ignore media that doesn’t reflect their reality. They split small purchases into payments due to limited income and maxed-out credit, living in survival mode by covering essentials when money runs out. Their resources have thinned, not because of bad planning, but unfulfilled promises. They take gig jobs—rideshares, deliveries— where hours are their only asset. They skip or have minimal insurance; when things break, or they get sick, they face tough choices as crises escalate. They make minimal repairs instead of renovations. When they gamble, it’s a hope for a windfall—waiting to make ends meet. They order DoorDash from exhaustion, not for indulgence; cooking isn’t affordable. Their focus is on survival, with the future being whatever remains after the current week.

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How the K-Shaped Divide Will Reshape Consumer Behavior in 2026

1. THE UNINSURED GAP GROWS.

Tax season, cold weather, deferred maintenance. When the car breaks down or the pipes freeze, Wealth Builders simply file a claim. Margin Survivors choose which bills or repairs to skip and which kids to keep home with the flu rather than send them to the doctor and pay one more bill. Brands, retailers, insurers, and hospitals see the effects in payment delays, abandoned carts, lapsed policies, and ER visits. Data shows that Margin Survivors are severely underinsured, and in Q1, this gap evolves into a crisis.

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2. BNPL PROVIDERS WILL SACRIFICE GROWTH FOR SURVIVAL.

Klarna's credit losses doubled in Q3 2025, while. A class-action lawsuit alleges hidden risk to consumers. Affirm is shifting to bank-account-linked underwriting. Approval rates will drop even as applications surge, creating a credit cliff for Margin Survivors who depend on installment access.

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3. GIG PLATFORMS WILL SEE RECORD SUPPLY AND COMPRESSED EARNINGS.

Job anxiety is spreading. Gig signups will accelerate through Q1, but demand won't keep pace. Per-delivery and per-ride earnings will compress, turning backup plans into treadmills.

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4. "AFFORDABLE INDULGENCE" BRANDS WILL OUTPERFORM.

The Margin Survivor can't afford a vacation, but they'll spend $6 on a fancy coffee or $12 on a craft cocktail in a can. Watch for outsized growth in small-ticket treats — the pressure valves that make the week survivable.

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5. THE EMOTIONAL RECESSION ARRIVES.

Economic headlines will keep celebrating GDP growth and market highs. Margin Survivors will keep not believing them — because those numbers don't describe their lives. Watch for consumer confidence to split further by income: the top getting nervous despite good news, the bottom tuning out the news entirely. Two economies, two realities, and a growing gap between what the data says and what people feel.

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DATA SOURCES FOR THIS EDITION OF THE ELI REPORT

Insights are based on Sooth’s patent-pending methodology, which analyzes over 100 million intent signals from 220 million anonymized US adults to predict, with 91% accuracy, how their emotional, practical, and situational needs will influence their buying decisions and the subsequent impact on people, businesses, and the economy. In addition, the following sources were used for corroborating data and qualification of predictive insights:

• Consumer sentiment 25% below January 2025: University of Michigan Surveys of Consumers, January 2026
• High-income sentiment declining, low-income rising: University of Michigan Surveys of Consumers, January 2026
• 4% vs 1.4% wage growth gap: Bank of America Institute, December 2025
• Top 10% account for nearly half of spending: Moody's Analytics / Federal Reserve data, January 2026
• 22% believe they'll never escape credit card debt: Bankrate 2026 Credit Card Debt Survey, January 2026
• 15.3% expect to miss debt payment — highest since April 2020: NY Fed Survey of Consumer Expectations, January 2026
• $18.59 trillion household debt: Federal Reserve Bank of New York, Q3 2025
• Klarna credit losses doubled Q3 2025: Klarna Q3 2025 earnings report
• Klarna class action deadline February 20, 2026: Nayak v. Klarna Group plc

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About Sooth & ELI

Sooth is the predictive intelligence company decoding the 93% of human decisions driven by emotional, practical, and situational needs. Powered by ELI — Sooth’s exclusive Emotional Logic Interface — Sooth uncovers hidden signals, turning audience behavior into predictive foresight. Sooth’s patent-pending methodology uses artificial intelligence to cross-reference more than 100 million intent signals with data on 300 million individuals worldwide to predict buyer tendencies with 91% predictive accuracy. For more information, visit soothbetold.com.

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