A K-shaped U.S. economy—where wealth continues to concentrate at the top while the bottom half struggles—is leaving its mark on American businesses, with luxury and high-end discretionary spending rebounding even as mass-market consumption weakens and consumer sentiment plummets to recessionary levels.
According to Bank of America card data, U.S. luxury spending rose 4% year-over-year in October, a five percentage point improvement from the third quarter's 1% contraction. Jewelry spending was especially strong, accelerating from 10% in the previous quarter to 16% last month—the highest growth rate across all tracked categories.
In a note shared Thursday, Ashley Wallace, analyst at Bank of America, said October showed clear "green shoots" in U.S. luxury spending, adding that “almost all data points improved on a 1-year and 2-year basis.”
October's improvement was visible across both soft luxury and jewelry. Overall, American luxury revenues in the third quarter climbed 5% year-over-year, outperforming other global regions and improving from the second quarter's 1%.
Main Street Confidence Crumbles As Wealth-Gap Deepens
The rebound in high-end consumption stands in stark contrast to what average Americans are feeling.
Last week, the University of Michigan's Consumer Survey showed that the sentiment gauge dropped to 50.3 in November, down from 53.6 in October and far below the long-term average of 85. This marks the lowest level since June 2022 and among the weakest readings since the survey began in 1952.
Read also: Consumer Sentiment Tanks To 2022 Lows, But The Richest 3% Are Celebrating
Bank of America economist Aditya Bhave said the spending gap between high- and low-income households remains both "steady and substantial," especially in discretionary categories such as airlines, lodging, furniture and cruises.
Apollo Global Management's chief economist Torsten Slok said recent data confirms the shift: "Today, wage growth for low-income workers is significantly lower than wage growth for middle- and high-income workers," reversing the trend seen during the pandemic.
Federal Reserve data shows that the wealthiest 10% of Americans own 87% of all U.S. stocks, with the top 1% alone holding 38%.
Labor market pain adds to the wealth divide. So far in 2025, over 1.09 million layoffs have been announced—up 65% from the same period last year and on pace for the worst year since the pandemic. Job cuts surged 175% in October alone, according to Challenger, Gray & Christmas.
Wall Street Bets On The Upside Of Inequality
Investors are already responding to the new consumption map. The Kraneshares Global Luxury Index ETF (NYSE:KLXY) has risen for five straight sessions as of Nov. 13, reflecting growing confidence in premium brands.
The top 10 holdings in the Kraneshares Global Luxury Index —which together account for 65% of the fund's total weight—are LVMH Moët Hennessy – Louis Vuitton (OTCPK: LVMUY), Compagnie Financière Richemont SA (OTCPK: CFRUY), L’Oréal S.A. (OTCPK: LRLCY), EssilorLuxottica (OTCPK: ESLOY), Hermès International (OTCPK: HESAY), Moncler S.p.A. (OTCPK: MONRF), Ralph Lauren Corp. (NYSE:RL), Deckers Outdoor Corp. (NYSE:DECK), Ferrari N.V. (NYSE:RACE), and Kering SA (OTCPK: PPRUY).
For investors looking to position around this trend, don't miss Benzinga's latest research feature: 4 Stocks To Consider Buying As Luxury Spending Keeps Rising.
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