Wall Street Veteran Ed Yardeni: Boomers' $90 Trillion Is What's Really Driving the Economy

The G-Shaped Economy

Economists have spent two years trying to explain why American consumers keep spending money they supposedly don't have. The usual answer has been a "K-shaped economy": rich households riding the stock market up, everyone else squeezed by inflation and stagnant wages.

Ed Yardeni, a longtime Wall Street strategist, says that story misses the real divide. In a research note earlier this month, Yardeni argued the split isn't about income class. It's about age. He calls it the "G-shaped economy" — G for generation.

The numbers back him up. Baby boomers now hold a net worth of nearly $90 trillion, about 52% of all U.S. household wealth, according to Yardeni. The Silent Generation, boomers' parents, holds another $20 trillion that will largely pass down to their boomer children in the coming years.

Boomers control 54% of household stocks and mutual funds, worth close to $30 trillion, and own 41% of all household real estate, more than any other generation, Yardeni found. Consumer spending accounts for roughly 70% of U.S. GDP, so when one generation dominates the balance sheet this heavily, it dominates the spending too.

"The concentration of wealth among older generations suggests that consumer spending is increasingly being supported by the spending of accumulated retirement wealth rather than labor income," Yardeni wrote, according to Fortune.

Why Higher Rates Don't Hurt Boomers the Way They Hurt Everyone Else

The Federal Reserve's rate hikes, which were supposed to cool spending across the board, have barely touched boomers. Yardeni's data shows boomers hold roughly $3.1 trillion in money market funds, about 60% of the household total, meaning higher rates hand them more interest income. The Silent Generation holds another 16%.

Younger Americans, by contrast, have less invested overall and what they do hold skews toward rate-sensitive growth stocks that get hurt when borrowing costs rise.

Housing tells the same story. High mortgage rates are locking millennials and Gen Z out of homeownership just as many are starting families and need more space. Boomers, meanwhile, are sitting on ultra-low mortgage rates from years past or own their homes outright, and they're not selling. That keeps housing supply tight and prices climbing, which only adds to boomer net worth.

"For a large segment of the population, rates are not simply a cost of borrowing," Yardeni said. "They are also a source of income and the reason that home prices are rising!"

The Labor Market Underneath It

While boomer spending keeps GDP humming, the job market younger workers depend on has been wobbling. The Bureau of Labor Statistics reported the U.S. lost 23,000 jobs in July, the first monthly decline of this economic cycle, against expectations of an 83,000-job gain, according to BLS data reported by CNBC.

The breakdown matters. Private-sector employers actually added 30,000 jobs. Government payrolls shed 53,000, with public education alone down 50,000. Health care added 22,000 jobs; retail lost 19,000. In plain terms, the July loss was a government payroll story, not a broad business collapse.

More troubling were the revisions. May's job gain was marked down from an initial 129,000 to just 63,000, according to BLS figures. That's the kind of downward revision that makes economists nervous about how solid the underlying labor market really is, even as boomer-driven consumer spending papers over the cracks.

The Fair Counterargument, and What It Misses

Someone could reasonably argue there's nothing scandalous here. Boomers earned this wealth over 40 or 50 years of working, saving, and buying homes when prices were a fraction of today's. Riding out market cycles and paying down a mortgage isn't a scheme, it's patience. Nobody forced younger Americans to skip investing.

That argument has merit. But it doesn't fully explain the mortgage lock-in effect or the money-market windfall, both of which are direct products of Federal Reserve policy over the past two decades, not personal virtue. Near-zero interest rates for most of the 2010s let boomers refinance into cheap 30-year mortgages; the Fed's subsequent hikes then made staying put more valuable than moving, freezing housing supply for younger buyers who had no shot at those same rates. That's a policy outcome layered on top of decades of saving, not purely a story of individual merit.

The open question is what happens when the transfer accelerates. Trillions in Silent Generation wealth are set to pass to boomers in the coming years, and eventually from boomers to their own children. Whether that inheritance wave narrows the generational gap Yardeni describes, or simply moves the G-shaped economy down one generation, is something no one has an answer for yet.

Sources

Fortune, "We're living in the 'G-shaped economy'—where boomers control $90 trillion, and everyone else waits." The Skeptical Investor Newsletter, "The G-Shaped Economy," citing Bureau of Labor Statistics and CNBC reporting on the July jobs report.