Goldman Sees Middle Class "Outperforming", Yet K-Shaped Economy Persists
All of Goldman’s 2026 global outlooks across macroeconomics, markets, and the consumer were rolled out Monday for Premium and Pro readers, offering more visibility for how the firm’s top desks are viewing this year.
In this note, we focus more closely on the consumer outlook, where Goldman expects middle-income households to outperform while lower-income consumers remain under pressure, reinforcing the view that the K-shaped economy is alive and well.
For 2026, Goldman Sachs Managing Director Kate McShane said her economists expect faster disposable personal income growth as tariff-related inflation subsides and President Trump's One Big Beautiful Bill (OBBB) takes effect, particularly benefiting middle-income households, while easier monetary policy and lower household obligations support borrowing and mortgage equity withdrawals.
"Ultimately, we expect these factors to drive an acceleration in discretionary cash inflow for the US consumer in 2026, up to +5.1% (vs. +4.1% in 2025), with the mid-income (i.e., third) quintile to see +6.9% discretionary cash inflow growth in 2026," McShane said.
She continued, "Our economists expect Medicaid and SNAP cuts to weigh disproportionately on real income growth amongst the bottom-income quintile, which will drive deceleration in discretionary cash inflow for the fifth quintile in 2026 of +3.2% (vs. 3.3% in 2025)."
McShane noted, "However, our economists also highlight a fragile job market (with rising unemployment rates) as a potential risk that could spark recession fears ahead, especially if companies increase their focus on lowering labor costs in the year as AI-led applications drive a faster underlying improvement in productivity."
What's evident is that the K-shaped economy is intact this year as Democrats have hounded the Trump administration on this topic, but fail to even mention that the crippling of lower-income consumers was a byproduct of failed Bidenomics. However, the White House has made progress, especially on the energy front, but sticky food inflation, such as beef, remains a major headache this year.
Given McShane's view of middle-income to outperform this year, she highlighted the best-positioned consumer stocks under the GS stock coverage universe:
Hardlines/Broadlines: DKS (on CL), WMT (on CL), ULTA, VVV
Consumer Staples: PM, MNST, EL, PEP, STZ, TAP, HSY (on CL),
SFM Softlines & Apparel: KTB (on CL), GAP, SN, BURL, ROST
Specialty & Apparel Retail: ATZ, BOOT, GRGD
Gaming & Lodging: MAR, CCL, LVS, WYNN (on CL), HLT
Restaurants: CMG, DRI, EAT, MCD (on CL), YUM
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