Ed Yardeni says the Eliyahu Ed Yardeni G-shaped economy is being powered by baby boomers, not by wages alone. In a note early this month, the Wall Street veteran argued that their nearly $90 trillion in net worth is keeping consumer spending sturdy even after higher interest rates.
Consumer spending makes up roughly 70% of GDP, so the money flow matters. Yardeni said the concentration of wealth among older generations means spending is increasingly being supported by accumulated retirement wealth rather than labor income.
Ed Yardeni and the G-shape
Yardeni dubbed the pattern the G-shaped economy. The idea borrows from the better-known K-shaped split, but his version puts age and asset ownership at the center: baby boomers are carrying the spending side while younger households face tighter conditions.
That divide is already visible in the housing market. High mortgage rates are pricing millennials and Gen Zers out, while many boomers have locked in ultralow mortgage rates from years ago or own their homes outright.
Wealth, stocks, and real estate
Baby boomers control about 52% of all U.S. household wealth, and Yardeni said they hold close to $30 trillion in household stocks and mutual funds. They also own 41% of all household real estate and hold around $3.1 trillion in money-market funds, about 60% of the household total.
The Silent Generation is expected to pass on much of its $20 trillion to boomer children, adding to the same pool. That leaves older households with more assets that can support spending even when borrowing is expensive.
Higher rates and AI
Yardeni said higher interest rates have done less to restrain consumer spending than many economists anticipated because rates are also feeding income and home values for large parts of the population. “For a large segment of the population, rates are not simply a cost of borrowing. They are also a source of income and the reason that home prices are rising!” he said.
He added that boomers are largely insulated from the labor market, which AI could disrupt, while the AI boom itself is another major driver of growth. Just a handful of hyperscalers are on pace to spend more than $1 trillion next year, but the older generation’s balance sheets are already doing their part now.
