Upper-income optimism powers consumer spending, but for how long?

Wealthier Americans are feeling upbeat as their investment portfolios help to make them feel better off, despite the ongoing concerns about the economy.

The financial sentiment of consumers earning at least $100K annually has improved, but those in middle and lower income segments are under pressure as the housing market stagnates and the labor outlook remains uncertain.

Data from the Bain & Company/Dynata Consumer Health Index for July highlights a significant six-point jump in the forward-looking outlook for upper-income Americans, building on a record-setting 10.5-point surge in June.

This sharp rebound has returned sentiment to pre-April tariff levels and lifted the composite consumer outlook index to 101.0, signaling renewed confidence among a critical demographic that accounts for a disproportionate share of US consumer spending.

“Upper-income Americans are now completely out of the period of tariff doldrums and are expecting great things from their investment assets,” said Brian Stobie, vice president in the Macro Trends Group at Bain & Company. “They are growing more enthusiastic about spending more, with our readings at levels not seen since two years ago, when this group’s spending was riding high on the pent-up demand of the post-Covid period.”

Indeed, spending intentions among upper-income households climbed 2.4 points in July and now sit at 112.4—the highest reading since late 2023. With equity portfolios swelling alongside market highs, these consumers are signaling a willingness to loosen their wallets, especially on discretionary categories such as travel, luxury goods, and home improvements.

However, this optimism is tightly tethered to the current strength of the equity markets and a reversal could quicky change spending appetites. It’s also important to note that unlike post-Covid recovery phases, when pent-up demand was broad-based, today’s spending revival is increasingly narrow, concentrated at the top.

Meanwhile, the rest of the consumer economy is flashing warning signs.

The CHI gauge for middle-income Americans’ intent to spend fell to 97.4 in July, down three points over two months, as housing market sluggishness tempers sentiment. Lower-income earners are even more pessimistic, with outlook scores stuck below 97 and little sign of labor market relief on the horizon.