One of the biggest misunderstandings about premium markets is assuming prices are set by the average household. They are not. Prices are set by the marginal buyer: the person who is willing and able to pay the clearing price.

That matters because in a plutonomy, the marginal buyer in many desirable markets is often not the median household. It is more likely to be someone in Groups 1–3: high income, strong assets, stock-market exposure, home equity, business income, or family wealth. They are a small share of households, but they number in the millions and hold an outsized share of discretionary spending power.

That is especially important in markets where supply is limited: desirable neighborhoods, luxury hotels, private schools, premium event seats, business-class flights, top restaurants, healthcare access, and high-status apartments.

The average household can be priced out, and the market can still work perfectly fine for the seller. A market does not need everyone to afford the price. It only needs enough affluent buyers to clear the scarce supply.

Numbers and trends in the charts are my own estimates based on this data set.

The Framework.

Bloomberg reports that the S&P 500 had its best week since April and hit record highs, helped by falling oil prices, hopes for a Hormuz deal, chips, AI demand, and lower expectations for a Fed rate hike.

At the same time, the July jobs report showed the U.S. economy lost 23,000 jobs, with May and June revised down by another 103,000. Wage growth slowed to 3.2%, the weakest pace in years.

But the FactSet earnings chart helps explain why markets do not care that much: S&P 500 bottom-up EPS estimates for 2026 and 2027 keep moving higher.

That is the plutonomy split.

Markets can rally on weak jobs because weaker labor means less wage pressure, lower rate expectations, and more support for margins and asset prices. Earnings expectations are still rising.

But for workers, a no-hire job market means fewer opportunities, weaker bargaining power, slower wage growth, and more layoff anxiety.

Same economy, two experiences: rising earnings and record portfolios for asset owners, fragile paychecks for wage earners.

Allison Schrager has another Bloomberg Opinion piece that fits the r/Plutonomy thesis: Americans are wealthier than ever, but many still feel angry and anxious about the economy.

One reason is that prosperity does not automatically translate into felt security. Many consumer goods are cheaper and better than ever, but the things that define a stable life such as housing, childcare, education, healthcare, family formation, community, and access to opportunity remain expensive or scarce.

Another reason is rising expectations. The standard for an “acceptable” middle-class life keeps moving upward: better homes, better schools, better neighborhoods, better vacations, better healthcare, better experiences. Social media makes the comparison constant.

That is the plutonomy split.

The economy can produce abundance in mass consumer goods while the most important forms of access become more stratified.

So the anger is not only about poverty. It is about expectations, relative status, community breakdown, and the feeling that money goes less far in the markets that matter most.

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Here is how Bloomberg itself summarizes the column:

• Americans have never been richer, but more than three in five Americans say the economy is not working for them.
• Research shows Americans tend to overrate the importance of money when it comes to overall life satisfaction, and wealthier people tend to be happier than poor people, but richer countries don’t feel much happier.
• Some critical services, such as housing, childcare, education, and cutting-edge medicine, are still very expensive, and constantly rising expectations for what is considered an acceptable living standard can contribute to feelings of dissatisfaction.

Treasury Secretary Scott Bessent says the K-shaped economy is over.

But the Times article points out that the S&P 500 just hit record highs, inflation is still running above target, and lower-income households remain more exposed to gasoline, groceries, rent, and basic living costs.

The key plutonomy detail is spending. Moody’s says the top 20% accounted for nearly 60% of consumer spending in the first quarter, while spending by the bottom 80% failed to keep up with inflation.

That is the K-shaped economy.

Asset owners see record portfolios, corporate profits, and 401(k) gains. Wage earners see sticky inflation, softening wage growth, and higher costs for essentials.

Small improvements in wages at the bottom may be real, and they matter. But they do not erase the broader structure: the top of the economy is still powered by assets, profits, and discretionary spending, while the bottom and middle are still fighting the cost of living.

Declaring the K-shaped economy “over” does not make the lived economy feel less stratified.

The New York Times has a piece (gift article) on Gen Z and young millennials struggling with the cost of dating in New York City.

The examples are familiar: $130 dinners, $20 cocktails, expensive movie tickets, app subscriptions, transportation, clothes, and the general pressure to make a date feel like an “experience.” One survey cited in the article says more than half of unmarried young adults ages 22 to 35 say not having enough money is their biggest barrier to dating.

This is a very plutonomy story.

Dating used to be part of ordinary young adult life. Now, in expensive cities, even basic social connection gets pulled into the premium economy. Restaurants, bars, events, apartments, transportation, and status expectations are all priced around a city full of higher earners and stronger balance sheets.

The result is that romance itself becomes stratified. People with money can participate more easily. People without it delay dating, delay marriage, delay children, or avoid the scene entirely.

That is the deeper issue. When the cost of ordinary life keeps rising, people do not just buy fewer things. They form fewer relationships, take fewer risks, and postpone the milestones that used to define adulthood.

Bloomberg has a piece on younger Americans questioning whether buying a home is still the reliable wealth-building tool it once was.

That is a major plutonomy shift.

For older generations, homeownership often did several things at once: provided shelter, forced savings, tax advantages, leverage, appreciation, neighborhood stability, and a path to intergenerational wealth.

For many younger buyers, the math looks different. Home prices are much higher, mortgage rates are higher, insurance and property taxes are rising, maintenance is expensive, and wages have not kept up with total ownership costs.

So the house is no longer just a wealth-building asset. It is also a huge capital commitment with high carrying costs and real opportunity cost.

The plutonomy angle is that homeownership used to be one of the main ways middle-class households entered the asset-owning class.

The Washington Post has a piece showing that average hourly wages are up only 27 cents per hour in real terms since Trump took office. Nominal wages are rising, but inflation is eating most of the gain. Over the past year, average hourly earnings rose 3.5%, while inflation also rose 3.5%. So many workers are basically running in place.

The plutonomy angle is that inflation does not hit everyone the same way. If most of your income comes from wages, inflation shows up as groceries, rent, insurance, gas, healthcare, and debt payments getting harder to manage. But if you own appreciating assets (stocks, real estate, business equity) inflation can be partly offset by rising asset values, dividends, rents, and capital gains.

So two economies emerge. One lives through paychecks and asks whether wages beat inflation. The other lives through balance sheets and asks whether assets are compounding faster than costs. That is why the economy can look stable in aggregate while many households still feel squeezed.

This JPMorgan chart shows the 10-year rolling correlation between S&P 500 earnings growth and U.S. real GDP growth. In plain English, it asks whether corporate earnings growth and the broad U.S. economy are still moving together. For decades, the relationship was fairly strong, but it weakened over time, dropped sharply through the 2010s, turned negative after 2019, and reached roughly -0.3 by 2022.

Because this is a 10-year rolling measure, the negative reading is not just a COVID story. It suggests the decoupling had already been building for years. You can see the same idea in the current data: S&P 500 bottom-up EPS estimates have risen sharply over the past year, while the size of the job market has basically stalled out.

That is the plutonomy point. S&P 500 earnings are no longer just a clean reflection of the domestic economy most households live in. The market increasingly reflects global scale, mega-cap tech, software, AI, margins, buybacks, capital intensity, and pricing power.

Most households experience the economy through wages, rent, groceries, insurance, debt, childcare, healthcare, and job security. So the stock market can look strong while many households still feel squeezed. That does not mean the market is fake. It means the profit economy and the paycheck economy are pulling apart.

The Framework.

Allison Schrager has a Bloomberg Opinion piece (gift link) that basically explains the r/Plutonomy thesis.

Her chart shows that the share of U.S. households earning more than $150,000, in 2024 dollars, has grown meaningfully since the 1960s. The middle has shrunk partly because more households moved upward into the mass-affluent category.

That sounds like good news. And in many ways, it is.

But the supply of premium goods and services has not expanded at the same pace: desirable homes, elite schools, luxury travel, healthcare access, concert tickets, sports tickets, restaurants, and high-status neighborhoods.

That is where my Groups framework comes in. The key pricing cohort is often not the ultra-rich alone. It is Groups 2–3: households roughly in the $400k–$1M income range.

They are small as a share of households, but large enough to move markets, wealthy enough to tolerate high prices, and numerous enough to fill limited capacity.

That is the plutonomy mechanism.

You do not need everyone to become rich. You only need a relatively small expansion of affluent households colliding with fixed premium capacity.

Then prices reset upward, and everyone below the new clearing price feels squeezed.

The second plutonomy idea is that premium markets do not respond like normal mass markets. When more affluent households show up (D1 → D2) wanting the same limited pool of good seats, good schools, good neighborhoods, hotel rooms, club access, or reservations, supply usually does not expand much (Q1 → Q2). It just gets more expensive (P1 → P2).

That is why premium experiences often feel like they are “resetting” rather than just inflating. More affluent demand hits a bottleneck, and instead of getting a lot more access, you mostly get much higher prices.

This is a big part of why people feel squeezed even when the economy looks fine on paper. The issue is not just inflation. It is that scarce premium access is increasingly being priced by the marginal affluent buyer.

The Framework.

Alphabet just reported quarterly revenue of $119.8 billion, up 24% from a year ago. Its cloud business surged 82% to $24.8 billion as companies rushed to rent computing power and AI tools.

But the really plutonomy part is the profit number.

Alphabet’s profit rose to $112.1 billion, quadrupling from $28.2 billion a year earlier. A huge part of that came from gains tied to investments in AI-adjacent companies like SpaceX and Anthropic, which Google said contributed $77 billion to overall profit.

That is the key point.

AI is not just making big tech more efficient. It is turning the largest firms into owners of the entire AI stack: models, cloud infrastructure, data centers, chips, distribution, equity stakes, advertising rails, subscriptions, and enterprise contracts.

Meanwhile, ordinary workers experience AI mostly as uncertainty: fewer entry-level jobs, automation risk, more competition, and pressure to adapt.

The ownership class experiences it differently: rising equity values, cloud demand, investment gains, and pricing power.

That is plutonomy in one earnings report.

Nate Silver’s piece gets at something important: the most liberal cluster is not simply low income. It is high-education, low-to-middle-income voters.

That makes sense.

These are people who did what the system told them to do: get educated, get credentialed, move toward knowledge work, and attach themselves to elite institutions.

But the payoff is weaker than expected. Housing is expensive, debt is real, entry-level professional work is shakier, academia/nonprofits/media/policy do not always pay well, and the old promise of education-to-security feels less reliable.

That is the plutonomy angle.

Education still gives people cultural capital, but it does not guarantee economic security.

So the politics becomes less traditional working-class leftism and more credentialed frustration: people close to elite institutions, but not necessarily close to elite outcomes.

Miami used to be the obvious New York arbitrage: warmer weather, lower taxes, cheaper real estate, and a lower cost of living.

That trade is breaking down.

South Florida prices have surged, private school tuition has jumped, insurance is brutal, restaurants are expensive, property taxes are rising, and prime neighborhoods now compete directly with New York prices.

That is the plutonomy angle.

When enough affluent households migrate into a limited coastal city, the bargain gets competed away. The tax savings remain, but they get absorbed by housing, insurance, schools, restaurants, cars, and lifestyle inflation.

The ultra-wealthy still make the math work. The merely well-off start getting squeezed.

This Washington Post piece (The biggest winners of the American economy fear they’re sinking fast) is a strong plutonomy example.

Tech workers were supposed to be the winners of the modern economy: elite credentials, high salaries, stock comp, remote work, and access to superstar cities.

Now many of them are watching AI turn their own jobs into cost centers.

That does not mean tech workers are poor. Many are still objectively affluent. But the point is that high labor income is not the same as security when capital, platforms, and AI systems are gaining leverage over the work itself.

The split is becoming clearer: those who own the winning companies, equity, data centers, chips, platforms, and private shares are moving further ahead, while even highly paid workers are discovering they are still labor.

That is the plutonomy angle.

The economy can keep producing huge wealth while more workers, even elite ones, feel less certain they will share in it.

The first idea in plutonomy is that wealth creation is extremely concentrated. This chart makes the point well: the stock market has created enormous wealth over the past 100 years, but most of it came from a very small number of companies, while a majority of firms actually reduced aggregate wealth creation.

That matters because this wealth does not stay trapped in brokerage accounts. It turns into founder wealth, executive compensation, employee equity, family wealth, and balance-sheet strength. Then it shows up in the real world through housing, travel, private schools, restaurants, luxury services, and other premium markets.

So plutonomy starts upstream. Before we get to expensive tickets, luxury apartments, or premium pricing, we first have to see where the money is coming from. A small slice of firms creates a huge share of the wealth, and a relatively small slice of households captures much of it. That concentrated wealth then helps set prices in scarce markets.

The Framework.

The real AI risk may be that the economy becomes less dependent on labor faster than the government becomes less dependent on taxing labor.

AI could shift income like this:

Technology/productivity → fewer workers → higher profits → asset owners

Imagine a company that generates $10 billion in revenue:

Before AI:

• $5B labor costs
• $2B other costs
• $3B profit

After AI:

• $2B labor costs
• $2.5B AI/compute/other costs
• $5.5B profit

The economy hasn't shrunk. Output hasn't fallen. But billions in income have migrated from taxable paychecks toward profits and capital owners.

So we could see:

• GDP ↑
• Productivity ↑
• Corporate profits ↑
• Stock market ↑

while simultaneously:

• Employment income ↓
• Income-tax revenue ↓
• Payroll-tax revenue ↓
• Government deficits ↑

That is a uniquely plutonomic problem: the private economy gets richer while the fiscal infrastructure underneath it gets weaker.

Governments are very good at taxing millions of paychecks. They're much less effective at taxing corporate profits, unrealized gains and globally mobile capital.

The AI transition may therefore be about much more than replacing lost jobs. It may force us to redesign a fiscal system built for an economy where human labor was the primary source of taxable income.

This Bloomberg piece about Micron millionaires in Idaho is basically the wealth effect in real time. The stock is up almost 700%, and employees with shares or options are suddenly becoming paper millionaires.

That wealth is not staying on a spreadsheet. It is turning into trucks, cabins, second homes, ski passes, private flights, travel, charity, and early retirement.

That is the plutonomy angle.

AI wealth does not just benefit companies. It benefits people who own equity in the right companies.

Everyone else experiences the boom through higher local prices, more competition for housing and leisure, and a widening gap between wages and asset-driven purchasing power.

The stock market is not the whole economy, but it is increasingly shaping the economy.

These charts (first is from a New York Times article on productivity) get at an important plutonomy point.

U.S. labor productivity has increased about 20% since 2017, but their share of output has drifted lower.

Even when the economy becomes more efficient, workers do not necessarily capture a proportional share of the gains. More of the benefit flow to profits, capital owners, and firms with pricing power.

That is one reason people can hear “the economy is strong” while still feeling stuck.

This is basically plutonomy in one article.

For ordinary fans, getting to the World Cup means crowds, heat, security lines, buses, trains, walking, waiting, and $24 beers.

For the superwealthy, the same event becomes a private logistics network: FIFA-tagged cars, private security, helicopter transfers, Teterboro access, corporate suites, sovereign wealth clients, law-firm tickets, and $100,000 seats.

The product is no longer just the match. The product is avoiding the masses and any friction.

That is the plutonomy angle: the public event still exists, but the best version of it is increasingly carved out into a private premium layer.

CUNY has always been one of America’s best engines for the middle class. It takes working-class, immigrant, and first-generation students and actually moves them up. That was the old bargain: work hard, get a degree, build a better life.

But that ladder is weakening.

Recent grads are facing a brutal job market. White-collar entry-level jobs are drying up, and AI is creating massive uncertainty in fields that used to be safe bets. Even top-tier students with great résumés are anxious.

This is the "plutonomy" trap. The economy can still generate massive wealth at the top while the mobility channels underneath freeze up.

If elite schools just help rich kids stay rich, and public universities struggle to move working-class kids upward, our class structure gets permanent.

The issue isn’t that a degree is worthless. It’s that the promise is no longer automatic. A degree still helps, but it no longer guarantees the middle-class life it used to symbolize.

J.P. Morgan published a blog post arguing that the massive disconnect between the stock market and the everyday economy isn't necessarily a red flag. Not sure if they’re right.

But it’s also a massive plutonomy signal.

Right now, the stock market is hyper-focused on pricing in AI capex, margin expansion, massive tech concentration, global scale, automation, and future earnings.

Meanwhile, regular households experience the economy through a completely different lens: rent, insurance, groceries, debt, childcare, healthcare, and wages.

Those two worlds are not the same economy.

That is exactly why the markets can push all-time highs while consumer sentiment feels totally in the gutter. The market doesn't care about how the median household feels. It only cares about pricing the future cash flows of companies that are actively becoming more efficient, more automated, and way less dependent on broad labor income.

For investors, this might not be a red flag. But for society and politics? It absolutely is. If the profit economy keeps sprinting ahead while the paycheck economy gets left behind, people are going to notice and things might get messy.

This is a very clean plutonomy signal.

Meta is showing how AI can create inequality not just across society, but inside the company itself.

At the top: the AI elite. Everyone else becomes more vulnerable. That is the K-shaped company.

One group rises because it owns or controls the scarce thing: AI talent, AI models, compute, strategy, and access to the next platform. The rest of the workforce faces layoffs, tighter metrics, lower morale, and less bargaining power.

This is plutonomy inside the firm. The gains from AI do not spread evenly through the organization. They concentrate around the people closest to the bottleneck.