I’m often asked, “How is the market doing so well when the economy feels soft?” Yesterday’s Fed cut—very likely the start of an easing cycle—adds fuel to that confusion. The FOMC lowered the funds rate to 4.00%–4.25% and signaled room for additional cuts this year. Markets discount that immediately; the real economy absorbs it on a lag. (Federal Reserve)

Retirees Drive a Bigger Slice of Spending (and aren’t tied to hiring)

Retirees are quietly becoming the backbone of U.S. consumption. Variant Perception’s work shows the 65+ share of total consumption has been rising steadily and is projected to keep climbing for decades; add the 55–64 cohort and you’re talking a very large, growing chunk of demand. Retiree spending is less sensitive to job-market feedback loops—it’s funded by Social Security, pensions, and portfolio income—though it still responds to wealth effects like home and asset values. (X (formerly Twitter))

Hard numbers: households 65+ spent about $60,000 on average in 2023, and their mix tilts toward categories (healthcare, housing/services) that are resilient to short-term hiring slowdowns. Importantly, multiple studies find no sharp drop in nondurable consumption at retirement—people smooth spending as they transition out of the labor force. Translation: retirees keep the cash register ringing even when payrolls soften. (FRED)

The Spending Power of the Wealthy (and why stocks matter more than payrolls)

Today, the top 10% of earners account for roughly half of U.S. consumer spending—a record share versus ~36% in 1989. When their wealth rises, they open their wallets; when markets crack, they get cautious. That’s the wealth effect, and it’s a big reason the economy can hum along despite a cooling labor market. (The Wall Street Journal)

Why the Market Can Rally While GDP Feels Meh

The market’s lens is earnings, not GDP accounting. S&P 500 profits are roughly split between goods and services, while U.S. GDP is heavily services-and-government-dominated. Different mix, different drivers. That’s why earnings can accelerate (and stocks rip) even when service-heavy GDP reads as “soft.” (tker.co)

What This Means Right Now

• Fed pivot + wealth effect: Rate cuts support asset prices first; affluent and retiree spending sustains demand even if hiring cools. That’s a constructive backdrop for risk assets while the data “catches up.” (Federal Reserve)
• Don’t confuse headlines with setup: Labor may soften; markets can still grind higher if earnings and liquidity improve.
• Our stance: We separate economy talk from price drivers. We focus on earnings power, liquidity, positioning, and where the wealth effect actually bites. We never mistake the economy for the market—they’re linked and correlated, but not the same thing.

If you’re sitting on large idle cash or a portfolio that mirrors GDP instead of earnings drivers, we should talk about repositioning—before the cycle is halfway priced in.