[00:00:00] Foreign.
[00:00:04] This is Sales Globe Signals and I'm Mark Danolo and in this issue we're looking at our special K shaped economy. And serving the disproportionate difference in SalesGlobe signals, we're looking at two questions. Number one, what are the market signals? And number two, what does it mean for profitable revenue growth?
[00:00:26] So this is an audio version of the written signals that you can get online and I'm going to hit some of the key points and share these with you and you can dive deeper into the written version on LinkedIn and
[email protected] to get all the key stats and all the charts.
[00:00:42] So on the business shows, the financial shows, the economy looks great. The stock market's at a record high.
[00:00:52] The S P hit a record high 23 times in 2026.
[00:00:57] Unemployment near historic lows. GDP is growing.
[00:01:02] But when you look at it beneath the aggregate, the economy is split into two different pieces. And this is what they're calling the K shaped economy. This, this phrase started maybe a couple years ago, but it basically means the economy is in a couple of different pieces.
[00:01:18] And I think about the economy, if it was monolithic, it'd be just like a vertical rectangle. But because there are certain forces on it, it kind of pushes that side of the rectangle and it becomes a K. That's the way I like to kind of visually think about it.
[00:01:32] But the K is disproportionate.
[00:01:35] The top 10% of the K are thriving. This is the teeny weeny top of the K. This is not like a proportionate K that you would see in a book or in print. It's kind of this, this distorted K. So 10% are thriving on the top, 90% are managing, they're stretching, they're falling behind. That's the big base of the case. We're going to look at two, those two pieces today.
[00:02:02] And the core question is what arm of the K do your customers sit in or your customers customers if you're a B to B2B sales organization.
[00:02:15] So where do their customers sit and how's it impacting them? And how can you do well in the different parts of the K while doing good, serving the K in a good way? So we're going to walk through five signals, what they mean and some things you can be thinking about.
[00:02:34] So we started hearing about the concept of the K in 2020 and now it's a big reality. We hear about it all the time. There are three big forces that are forcing the K. And think about Pushing that side of the K in number one is inflation. It's post pandemic inflation.
[00:02:51] We had a prior issue of sales Globe Signals where we looked at inflation over the past, well really since 2020, in that four year period between 2020 and 2024. And we experienced almost half of a 20 year inflation rate in four years.
[00:03:09] So that was tough at that point and it has continued. So we still have sticky tough inflation. Number two is tariff driven price increases.
[00:03:21] That was largely self imposed by the administration, self inflicted pain, but that's been plaguing the K for over a year now. And number three, the most recent geopolitical energy shock from the Strait of Hormuz closing. And that's been hitting the lower arm of the K the hardest. So think of those as kind of punching in the side of that K.
[00:03:42] And we're going to look at two related measures. One is income of those groups and the other is wealth of those groups. So we'll look at it in both ways.
[00:03:52] So for example, the top 10% of earners drive nearly half of all the consumer spending. So think of that, the top 10%, that teeny part of the K driving half of all consumer spending, that's huge.
[00:04:05] What's even huger is the top 10% is holding approximately 69% of all the wealth in the country.
[00:04:16] So that's even more disproportionate. So for a business, understanding what portion of the arm your customers, or again your customers customers live in is really important.
[00:04:26] So let's look at Signal 1, which is the spending split is real and it's getting wider. So let's look at the top arm, that teeny part of the kitchen.
[00:04:35] Spending in the top 10% of US households grew 62% between Q3 of 2020 and Q3 of 2025. So that's a lot of growth. 62% growth in spending that far outpaced every other income group. By Q2 of 2025, that top 10% was responsible for nearly half of all consumer spending, as I said before.
[00:04:59] So that is hugely disproportional. If we look at the lower arm that's under strain. Spending in the lower third of households shrank in mid-2025 and it stayed nearly flat through the beginning of 2026. So you look at the upper arm of the K spending growing over 60% and the bottom of the K or the bottom third really of the households spending shrinking by Q4, 2025, 4.8% of all household debt was in some stage of delinquency credit card balances hit an all time high of $1.28 trillion.
[00:05:38] Student loan delinquencies jumped to 9.6% of balances. The personal savings rate, which had a pre pandemic average of 7.3% is now at 4.8%. So that's shrinking. So there's a financial difference. There's also a psychology difference.
[00:05:57] There is consumer confidence, which is a big factor. So obviously the wealthier households feeling pretty good. Stock portfolios, home equity values at record highs.
[00:06:06] Everybody else in that lower part of the K doing the math on the groceries.
[00:06:11] So what does that signal mean for profitable revenue growth? Well, number one, it's market segmentation. So it's not just an exercise and it's not maybe the segmentation that you've had for some time.
[00:06:20] It's looking at the segmentation of the K. And what do the segments look like in the upper arm of the K and the lower arm of the K, and how do we serve those customers most effectively? So that's going to be for consumer and it's also going to be for B2B organizations helping your B2B customers serve their customers for the upper part of the K that's growing. Your ultra high net worth Americans grew 5.4% in the first half of 2025 alone. So that segment, while it's small, is actually growing and continuing to spend.
[00:06:56] Signal two, inflation is one force that formed the K and it's not done. So we think about the forces punching the side of that K. Inflation is one of the big ones. Consumer prices are 24% higher than before the pandemic. So I was talking about the difference in inflation previously.
[00:07:14] Your $100 grocery bill pre pandemic in 2019 is now $125 for the same things, or maybe for the same things in smaller packages, $125 versus $100. So that is a big impact.
[00:07:31] Tariffs implemented through November 2025, they alone raised core prices by 3.1%.
[00:07:41] So tariffs are a huge contributor to that.
[00:07:45] And then if you think about interest rates, we had a reduction in the federal funds rate, but then the Fed paused in early 2026. And so where we thought we were going to get some relief in terms of interest rates for debt overall and also for secured debt mortgages, that relief has not come.
[00:08:10] Credit cards have it even worse. So credit card APRs are averaging over 21% right now.
[00:08:18] And they have had a bigger jump than mortgage rates have jumped, which means that's really hitting lower income People the most, the people carrying credit card balances. So if you think about it, the credit cards have become punishing and people are dipping into those to be able to, to cover their spending.
[00:08:38] What does that mean for profitable revenue growth? Well, for business to consumer, grocery, restaurants, retail, cpg, the lower arm customers have hit a wall. So as companies are raising prices 20%, 40%, whether that's due to inflation or whether it's due to tariff impacts or whether it's due to supply chain, with the straight of Hormuz closing, those consumers have hit a wall and they're making trade offs now. So they're making trade offs between buying gas and buying food and other discretionary purchases.
[00:09:17] So the winners in the lower arm in terms of B2C are offering genuine value. So you've got Walmart, TJX, Aldi, it's, it's not a, it's not premium prices, but it's actually value prices. So those are the winners right now for B2B selling into consumer facing industries.
[00:09:37] Procurement is reshaping. So if you're selling B2B, finance teams are scrutinizing expenses.
[00:09:45] Procurement is getting more rigorous at any point than it has been since 2009.
[00:09:53] So winners on the B2B front are demonstrating clear understanding of their customers. Challenges, clear roi, cost reduction, efficiency gains, real solutions to get past the scrutiny of the increasing scrutiny of procurement.
[00:10:13] On the other end of the K, if we're talking about B2B customers, customers, we're talking about B2C premium and high net worth markets.
[00:10:23] Luxury retail sales expected to grow 5.5% worldwide in 2026. So that's a growing market.
[00:10:29] The key risk though is the wealth effect. So for that top 10%, a lot of the purchasing behavior is highly correlated with equity market performance. So as long as the stock market's doing well, that purchasing continues. When the stock market pulls back the lower part of that top piece of the K, which we'll talk about more in a couple of minutes, the lower part tends to pull back as well.
[00:10:53] Signal three, the Hormuz shock is a K shaped accelerant. So while inflation and tariffs have been pushing in the side of the K, the closing of the Strait of Hormuz has actually accelerated that. It's made it even worse. So as we know, in, in March we had the closing of the Strait of Hormuz from Iran.
[00:11:13] 20% of all global oil trade flows through that strait.
[00:11:19] Brent crude oil prices surged 65%. They topped $100 per barrel. Although recently they have come back down since we've been working through some negotiations on that.
[00:11:32] Global merchandise trade growth is projected to decelerate from 4.7% growth to about 1 1/2 to 2 1/2% growth in 2026. And global GDP growth expected to slow from 2.9 to 2.6. So that's having a big impact globally. Even in the US where it was initially dismissed as being minor since we don't get a lot of oil through the street reform moves that has affected gas prices, it's affected heating costs, non energy commodities, things like fertilizers, aluminum, sulfur, plastics, those have been impacted. So that's causing cost of living increases.
[00:12:14] And on the top part of the K, while that's affecting everybody on the top part of the K, people invested in energy stocks and a lot of stocks that are benefiting from that are insulated a bit from that, that, from that shock. What does this mean for profitable revenue growth? Well, for energy and transportation companies, they're seeing higher revenue, higher margins, at least in the short term.
[00:12:41] Companies, however, that have supply chain exposure to the Gulf companies in chemicals, plastics, fertilizer, steel, they're seeing increased costs and supply chain issues. So their immediate priorities, securing better supply chain options.
[00:12:57] And for consumer facing companies in the lower arm, the energy shock is a demand destroyer. So again, pushing in that side of the K even harder. High gas prices, $4.50 Gasoline prices higher in some states, rising utility bills, that's compressing discretionary spending. If you look back on the issue of sales, Globe signals, our last issue, we were talking about the data center surge.
[00:13:23] We talked about higher utility bills, higher electricity bills, higher water bills in a lot of markets that's compounding the effect. So this is just kind of layering on top of it.
[00:13:33] So companies that have strong value propositions for their business customers and also for their consumer customers, and they have volume built cost structures. So they're not operating on super thin margins, but their cost structures can be adjusted.
[00:13:47] That that's making a huge difference. But from again a sales perspective, value proposition and offering true value and true solutions is key.
[00:13:56] Let's talk about the upper arm of the K. Signal 4, the upper arm of the K is a big market, but it also has its own fractures, its own layers.
[00:14:06] So we'll look at the upper arm. This is really interesting, the top 10%. So we kind of group them together as one group. 69% of wealth, as I mentioned before. But let's look at the strata of the top 10%. This is interesting. See if you can find yourself here. And if you find yourself here, you're probably in pretty good shape. The top 0.1% of households, those are households with at least $62 million in net worth control nearly 15% of all US wealth. So you think about that top 0.1%, 15% of all US wealth, top 1%, which is a minimum of 10 million in net worth, holds about 17% of the wealth. And the next 9%, these are the poor country cousins of those other folks above that. They have a minimum of just $2 million of net worth. They hold about 37% of U.S. wealth. So a number of different strata there. If you serve the higher end, if you're one of those companies that serves that higher end of the K, there's a big difference in needs, demands, things that are going to be purchased between a household with $2 million in net worth and a household of $62 million in net worth and the $62 million in net worth. Remember that is kind of the lower tier of that top 0.1%. That's just to enter into that club.
[00:15:24] So at that tier one, at the very top, the ultra high net worth households, they're expanding spending. So the high end luxury goods, jewelry, bespoke travel, wealth management services, that is growing below that tier, it starts to fracture.
[00:15:40] So you get what we call the aspirational luxury buyer.
[00:15:44] So somebody that's going to buy a $3,000 handbag, but they got to save for it, the luxury resale market. So this is buying used luxury goods that's growing at 13.7% annually. So that is actually expanding. So we're still getting those three thousand dollar handbags, but we're getting them secondhand, although they still probably look great.
[00:16:06] So what does that mean for profitable revenue growth?
[00:16:08] Well, for companies selling to premium and luxury buyers, it means clear segmentation and value proposition. So that top 10% is not all one group. So know what tier of that upper K that you're targeting and what your value proposition is for that group. So the top 0.1% is clearly different than the next 9.9%. And the resale luxury market is booming. So that is a big opportunity if you sell directly to those customers.
[00:16:37] For financial services and professional services, the mandate is move upstream. Ultra high net worth population is growing.
[00:16:47] Assets are growing faster than ever.
[00:16:50] Strong needs for estate, tax, philanthropic, cross border planning, very specialized needs for companies in technology, media, the upper arm is growing. It has a willingness to pay. So services like AI powered professional tools, premium subscriptions, health and wellness platforms, Those are expanding. Again, the risk is an overreliance on the success of the equity markets, which has a big effect on the lower end of that top 10% signal. 5. The K is different by global region, so not all K's are the same.
[00:17:28] So in Europe as an example, there's a more balanced K compared to the US where the top 10% capture about 36% of total income.
[00:17:39] In Europe it's about 28%.
[00:17:42] So you've got a little bit more in that bottom part of the K. You've got heavier labor protections, safety nets, universal health care, those types of things that make a difference there.
[00:17:54] In Latin America and Africa, a much more extreme case, so the top 10% capture 54% of income in Latin America, 55% in Sub Saharan Africa and in Asia a mixed K.
[00:18:06] So you've got the top 10% capturing about 43% in China, still higher than the US to 47% in Southeast Asia. So a bit more extreme than the U.S.
[00:18:17] china's luxury market has has contracted compared to the U.S. which has expanded. So some differences there.
[00:18:24] So what does that mean for profitable revenue growth? Well, very simply, regional variation creates market by market opportunities. So go to market strategy that works in the US and Western Europe may not work well in Southeast Asia, or value focused strategy in Latin America may be the wrong strategy for Japan. So understand your different global markets and the needs of those markets and how they're going to be different.
[00:18:49] Here's your call to action. The K shaped economy is disproportional. So understand the parts of the K, understand the tiers and have a strategy for each of those tiers for your organization, whether you're B2B or whether you're B2C and globally. Understand the differences in the Ks across the world, internationally and how you can work with them differently in terms of your opportunities and for your offers.
[00:19:17] And look at the signals that we just talked about from two angles. Number one, how do they affect your customers and their ability to grow? And number two, how do they affect your business, how you're going to organize in terms of your client base, your product mix and your go to market model. So get beyond the current state, ask your team where they see the signals projecting ahead. Create a plan and get into action. If you'd like more detail, you can get the full written version of signals on LinkedIn or on salesglobe.com we have all the charts and data there.
[00:19:48] And if you'd like to talk about what this means for your business, you can contact
[email protected] this has been sales Globe Signals and I'm Mark Dinolo. Thanks for listening.
