The remarkable resilience of the U.S. economy may be hiding a growing vulnerability that could be exposed if financial markets stumble, according to Diane Swonk, chief economist at KPMG, who warns that America’s expansion has become increasingly dependent on a relatively small group of affluent consumers enriched by the stock market’s AI-driven rally.

The concern is based on the growing concentration of wealth and spending power among high-income households, a trend that has helped sustain economic growth even as millions of Americans continue to struggle with the lingering effects of inflation and elevated borrowing costs.

“We have built up a mountain of wealth that is highly concentrated,” Swonk said.

The warning comes as U.S. equities continue to hover near record highs, fueled largely by investor enthusiasm surrounding artificial intelligence, cloud computing, and digital infrastructure. The surge has dramatically increased the wealth of households with significant exposure to stocks, particularly higher-income Americans whose portfolios have benefited from the multiyear bull market.

That dynamic has strengthened what economists call the “wealth effect”—the tendency for consumers to spend more when the value of their assets rises. As stock portfolios swell, affluent households often feel more financially secure and become more willing to spend on travel, luxury goods, entertainment, housing, and other discretionary purchases.

The challenge, however, is that this spending power is becoming increasingly concentrated. According to research from Moody’s Analytics, Americans in the top 20% of the income distribution—those earning more than $175,000 annually—now account for nearly 60% of total consumer spending in the United States.

That statistic underscores the emergence of what economists describe as a “K-shaped economy,” where wealthier households continue to prosper while many lower- and middle-income consumers face persistent financial pressures.

Mark Zandi, chief economist at Moody’s Analytics, has argued that the K-shaped economy remains firmly intact. While affluent households have benefited from rising asset values, the spending power of the remaining 80% of Americans has struggled to keep pace with inflation.

The result is an economy that appears strong when viewed through headline indicators such as GDP growth, employment, and consumer spending, but feels considerably weaker to a large portion of the population.

“That has left us with an economy that looks better in the aggregate than it feels to most Americans,” Swonk said.

The divergence helps explain one of the biggest puzzles in the U.S. economy over the past several years: why consumer sentiment surveys have often remained depressed even as economic growth and spending data have exceeded expectations.

Traditional economic models assume that broad-based improvements in economic conditions translate into improved consumer confidence. Today’s economy appears different because much of the growth is being driven by a relatively narrow segment of high-income households whose experiences differ significantly from those of average consumers.

For policymakers and investors, this concentration creates a new risk. This is because if economic activity is increasingly dependent on affluent consumers, then the sustainability of growth becomes more closely tied to the performance of financial markets. A sharp decline in stock prices could weaken household wealth, reduce spending among higher earners, and potentially create ripple effects across the broader economy.

“The unknown is whether those same affluent households will continue to spend as freely if financial markets correct,” Swonk said.

That question has become more relevant as valuations in several market segments reach elevated levels. The artificial intelligence boom has propelled technology shares to extraordinary heights, creating enormous gains for investors but also raising concerns among some economists and market strategists about potential overheating.

A market correction would not affect all Americans equally.

Higher-income households would likely absorb the largest paper losses because they hold a disproportionate share of stocks and other financial assets. However, because those same households are responsible for such a large share of consumer spending, a pullback in their expenditures could have consequences for businesses across the economy.

Swonk highlighted that risk when discussing the historical relationship between wealth and spending.

“Will that historic pattern hold if financial markets correct or is the cushion large enough to blunt the blow? That is one of many things that keeps me up at night,” she said.

The concern is not necessarily that a stock market decline would trigger an immediate recession. Wealthier households generally possess substantial savings, diversified assets, and stronger balance sheets than lower-income consumers. Those financial buffers could help soften the impact of a downturn.

Yet the concentration of spending power means the margin for error may be narrower than aggregate economic data suggest. The issue is becoming alarming because consumer spending accounts for roughly two-thirds of U.S. economic activity. If affluent consumers begin to reduce discretionary purchases, sectors ranging from travel and hospitality to housing, retail, and financial services could feel the effects.

The situation represents the broader U.S. economy over the past decade. Rising asset prices, booming technology stocks, and growing ownership of financial assets have increasingly benefited households at the top of the income distribution. Meanwhile, many middle-income families have faced rising housing costs, healthcare expenses, and other essential expenditures that have eroded purchasing power.

The AI boom has amplified those trends. Investors with exposure to technology companies have seen substantial gains, while households without significant stock ownership have captured fewer benefits from the rally. As a result, the same forces that have helped propel economic growth may also be creating a source of vulnerability.

For now, affluent consumers continue to spend, helping support employment, corporate earnings, and overall economic activity. But economists now acknowledge that the durability of the expansion may depend less on the average American consumer than on the willingness of wealthy households to keep opening their wallets.

That means that if financial markets remain strong, that dynamic could continue to support growth. If markets stumble, however, the concentration of wealth and spending that has powered the economy may become one of its biggest weaknesses.

Google parent Alphabet is set to join the Dow Jones Industrial Average, replacing Verizon in a move that further increases the influence of technology giants within one of Wall Street’s most closely watched benchmarks.

The change, announced by S&P Dow Jones Indices on Tuesday, will take effect before the start of trading on Monday. Shares of Alphabet rose in after-hours trading following the announcement, reflecting investor expectations that inclusion in the index could generate additional demand from funds that track the Dow.

The addition marks another milestone in the transformation of the Dow from an index historically dominated by industrial, manufacturing, and consumer companies into one increasingly shaped by the technology sector and the artificial intelligence boom.

Alphabet will join fellow technology heavyweights Nvidia, Amazon, Apple, and Microsoft in the 30-stock benchmark.

The index provider said Alphabet’s inclusion would strengthen the Dow’s exposure to some of the most important themes driving markets today, including artificial intelligence, cloud computing, and digital advertising.

The move also points out the growing centrality of AI to corporate America and financial markets. Alphabet has been investing aggressively to defend its leadership in internet search while expanding its position in generative AI, cloud infrastructure, and enterprise software.

The company has raised approximately $141 billion through debt and equity markets since October to support its AI ambitions, underscoring the enormous capital requirements associated with competing in the industry’s next phase.

Alphabet’s inclusion comes at a particularly interesting moment for the company. Despite being one of the world’s largest and most influential technology firms, investor sentiment has become increasingly mixed as markets scrutinize whether the massive spending on AI will ultimately translate into sustainable returns.

The stock suffered its worst single-day decline in more than a year on Monday, underperforming both the Nasdaq and other major technology companies. That pullback followed a period of strong performance earlier this year when Alphabet posted its strongest monthly gain since 2004 after reporting better-than-expected earnings, driven largely by accelerating cloud revenue growth and improving confidence in its AI strategy.

Even after recent volatility, Alphabet shares remain up more than 10% in 2026 and are on track for a fourth consecutive annual gain. The stock has delivered positive returns in seven of the past eight years, reinforcing its status as one of the market’s dominant long-term performers.

However, unlike the S&P 500, which is weighted according to market capitalization, the Dow is a price-weighted index. That means companies with higher share prices exert greater influence over the index regardless of their overall market value.

Verizon’s relatively low share price meant it represented only about half a percentage point of the Dow’s total weighting, limiting its impact on index movements. Alphabet’s higher share price is expected to give it a more meaningful role in shaping the benchmark’s performance.

The decision also highlights the declining representation of traditional telecommunications companies in major U.S. equity indices. While telecom operators were once viewed as core pillars of economic growth and innovation, investor attention has increasingly shifted toward companies building AI infrastructure, cloud services, and digital platforms.

The change is likely to be interpreted as another signal of Wall Street’s belief that future economic growth will be driven less by connectivity providers and more by companies controlling the software, data, and computing infrastructure underpinning artificial intelligence.

The reshuffling comes amid a broader reconfiguration of major U.S. stock indices as technology companies continue to command a large share of market value. The combined market capitalization of Alphabet, Nvidia, Microsoft, Amazon, and Apple now represents a substantial portion of the U.S. equity market, reflecting investor conviction that AI will remain a dominant investment theme for years to come.

S&P Dow Jones Indices also confirmed that Honeywell International will remain in the Dow under its new name, Honeywell Technologies, following the completion of the company’s aerospace spin-off. However, the newly separated aerospace business will not be added to the benchmark.

Shopify Inc. is preparing to ban all vape products from its e-commerce platform as early as this week, marking a significant victory for a bipartisan group of U.S. state attorneys general who have been pressing the company to curb the online sale of unlicensed e-cigarettes.

The Ottawa-based company, whose infrastructure powers millions of online merchants worldwide, has been in discussions with the coalition of 25 state attorneys general since last year. The officials have targeted not just retailers but the underlying digital and financial infrastructure enabling the sale of illegal vapes, which they argue pose serious public health risks, particularly to young people.

A Shopify spokesperson confirmed the company’s stance on illegal activity but stopped short of explicitly confirming the timing of the ban.

“We’ve always prohibited illegal activity and take action when we become aware of merchants violating our policies,” the spokesperson said in a statement. “We adjust our enforcement approach when legal changes call for it.”

The expected ban, first reported by Reuters, would represent the most substantial action yet by major digital platforms against the illicit vape trade. It applies to all vapes sold on Shopify, regardless of whether they hold FDA marketing authorization, according to two sources familiar with the plans.

The illegal U.S. market for vapes is currently valued at around $9 billion, according to British American Tobacco, whose legal U.S. business has been significantly undermined by the proliferation of unauthorized products. These vapes, often manufactured in China, are widely sold online and in physical stores despite being illegal to import or distribute without proper FDA approval.

To date, the FDA has granted marketing authorization to just 45 e-cigarette products, mostly tobacco-flavored. Big tobacco companies and some public health advocates argue that this restrictive approach has inadvertently fueled the black market.

Limited Impact on Licensed Players, Bigger Hit for Illicit Sellers

E-commerce represents a relatively small portion of authorized vape sales in the U.S., meaning the ban is expected to have minimal effect on licensed operators such as BAT or Juul. However, online channels are far more critical for illegal vape sellers, who rely on platforms like Shopify for reach and scale. The move could therefore have a “chilling effect” on those merchants and disrupt a key distribution channel.

Separately, Mastercard issued a global notice in May warning its partners, the financial institutions known as acquirers that onboard merchants to its network, that facilitating sales of unlicensed vapes violates its standards. The notice, obtained by Reuters, emphasizes that acquirers must implement stronger controls, including reviewing product inventories and monitoring transactions.

“We have zero tolerance for unlawful activity on our network,” Mastercard said.

The state attorneys general had urged Mastercard and other payment networks in an April letter to do more to prevent their systems from being used for illegal vape sales. Mastercard’s guidance recommends robust due diligence, with the threat of investigations, fines, or termination for non-compliant partners.

For Shopify, the decision was prompted by the growing pressure on technology platforms to act as gatekeepers for regulated or illegal products. While the company has long maintained policies against illegal activity, the scale of the illicit vape trade and the direct engagement from state law enforcement appear to have prompted stronger enforcement.

The ban’s geographic scope was not immediately clear. While the primary focus is the U.S. market, where regulatory scrutiny is highest, Shopify operates globally. Some countries, such as India, have outright banned vape sales, while Australia restricts them to pharmacies. The company did not respond to questions about whether the policy would extend beyond the United States.

The Illicit Vape Market

The explosion of illegal vapes has become a major public health and enforcement concern in the United States. Unregulated products, often containing high levels of nicotine or synthetic substances, have been linked to youth vaping epidemics and serious health incidents. State attorneys general have increasingly shifted focus from individual retailers to the infrastructure, payment processors, e-commerce platforms, and shipping companies that enable the trade.

However, the FDA’s limited authorization of products has created a stark divide: a small legal market dominated by tobacco-flavored options and a vast gray-to-black market offering thousands of flavored products that appeal particularly to younger users.

The ban is unlikely to have a material financial impact given the relatively small share of Shopify’s overall business tied to vape sales. However, it sets a precedent that could influence how the company handles other controversial or regulated categories in the future.

But as the crackdown on illegal vapes intensifies, the focus is expected to shift further downstream to logistics providers and payment networks. Mastercard’s warning to acquirers suggests financial infrastructure is the next frontier in enforcement efforts.

For platforms like Shopify, the message is that the era of relatively hands-off facilitation of all types of commerce is giving way to more active policing of what flows across their systems.

The ban, expected as soon as this week, represents a meaningful win for state attorneys general who have argued that tech companies must do more to prevent their platforms from becoming conduits for products that evade federal and state laws.