Video · 2026-07-29 · 1h 6m · 6 moments

45 Million Rich Households | AS 475

✦ AI generated

timeline · colored by role

Claim◆

The selloff in semiconductor stocks while the broader market holds up is good news — it shows the 'bubble' part of the market is deflating without taking down the entire market.

Michael argues that while semiconductor and memory stocks are getting hammered, the S&P 500 is nearly flat at all-time highs, which is a healthy sign of rotation rather than a crash.

transcript

Michael Batnick: This is one of the great things about the stock market. There are some stocks getting absolutely hammered right now. And yet, the S&P is basically at an all-time high. ... The part of the market that people were calling the bubble is debubbling or deflating and yet the market the S&P 500 was actually up today.

Context

The consensus bearishness on bonds is so universal that it makes me uncomfortable — bond yields are at 5% and everyone still hates them, which is surprising after a decade of zero rates.

Michael notes that everyone from pundits to investors is bearish on bonds, yet 5% yields would have seemed dreamy a decade ago. He questions what would have to happen for this consensus to be wrong.

transcript

Michael Batnick: I just feel like with bond yields being so much higher it would really surprise me 5 years ago if you said or 10 years ago if you said listen bond yields are finally going to be at 5% and everyone's going to still hate bonds. What like that that would have been surprising to telling someone that in the zero interest rate world that we lived in like hey real yields are finally going to be juicy enough but people want to like you know get something finally and now everyone still hates bonds. That's surprising to me.

Prediction◆

Emerging markets like South Korea, where young investors use extreme leverage (5x margin on trading apps), will see supercharged boom-bust cycles that mirror crypto, but this demographic shift is still a long-term tailwind for global equities.

Michael reads a story about a South Korean student who built and lost a fortune using 5x leverage. Ben argues that as younger generations in countries with low stock ownership rates enter markets, they'll supercharge cycles like crypto did, creating a long-term tailwind for global equities.

transcript

Ben Carlson: These other countries don't have nearly the ownership we have or like the institutional knowledge of the stock market because there's been just more time here to gain that knowledge. I think they're going to supercharge these cycles kind of like crypto. The crypto cycles all happen faster right the boom and the winter and the boom and the winter. I think that's going to happen with a lot of these individual countries as they as their young people learn the stock market. ... If you look at the ownership rankings like Japan, 15% of the households own stocks versus 65% here. That's a tailwind for global equities in the years ahead.

Data

The 45 million richest U.S. households — roughly the top third of the country — spend nearly $15 trillion annually, which equals 70% of China's entire GDP and 3x Germany's economy, and this cohort has been completely insulated from inflation.

Michael highlights data from the Carlyle Group showing that 45 million affluent U.S. households account for $15 trillion in annual spending — nearly 70% of China's GDP. Part of this resilience comes from homeowners locking in low fixed-rate mortgages, saving $300 billion annually versus adjustable-rate regimes.

transcript

Michael Batnick: The total outlays of 45 million US households is equal to nearly 70% of the entire Chinese economy. ... 45 million richest households in the USA ... account to combine for nearly 15 trillion in annual outlays. It's equal to three times the size of the entire German economy 70% of GDP of China. ... This is a third of the population and has not only been insulated from the inflation shock but also exhibits propensity to spend out of wealth and income.

Claim

Hyperscalers like Google are in a supply-constrained environment where AI demand still outpaces massive capex investment, and the stock getting punished 18% despite a monster quarter doesn't mean they'll stop spending — that only changes if shares drop 45%.

Michael reads a Google CFO statement about negative free cash flow and supply-constrained AI demand. Despite Google's stock being down 18% after a strong quarter, he argues the hyperscalers won't cut spending unless stocks fall ~45%.

transcript

Michael Batnick: She said, 'We're still in a supply constrained environment. ... the demand still outpaces that investment. We are just like the rest of the industry working in a supply constrained environment.' ... Stocks down almost 20%. ... I don't think that Sundar is going to say, 'Oh our stock is down 25%. We have to completely change everything.' I think if it's down 45, yeah, that's different. But we have a long way to go.

Data

Spending data from AmEx shows Gen Z spending is up 40% year-over-year and income inequality appears even more extreme among young people, with a wider range of outcomes than any previous generation.

Michael presents American Express data showing Gen Z spending up 40% year-over-year and notes the visible disparity among young people — some can't afford homes, others make fortunes at 25. Ben adds that coming out of the 2008 crisis everyone was equally broke, whereas now the divide is unprecedented.

transcript

Michael Batnick: American Express always breaks this down in terms of the year-over-year growth. So, baby boomers are up 5%. They're not spending that much anymore. Gen X 10% growth. Millennials 14%. Gen Z up 40%. ... Is income inequality even more pronounced for younger people? ... It seems like the have and the have nots are even more pronounced for people 25 and under.

provides context · 1

Highlight slides

Bubble deflates, market holds✦ from: The selloff in semiconductor stocks while the broader market holds up is good news — it shows the 'bubble' part of the market is deflating without taking down the entire market.Rotation, not rout✦ from: The selloff in semiconductor stocks while the broader market holds up is good news — it shows the 'bubble' part of the market is deflating without taking down the entire market.Emerging markets will supercharge boom-bust cycles like crypto✦ from: Emerging markets like South Korea, where young investors use extreme leverage (5x margin on trading apps), will see supercharged boom-bust cycles that mirror crypto, but this demographic shift is still a long-term tailwind for global equities.Low stock ownership creates a long-term tailwind for global equities✦ from: Emerging markets like South Korea, where young investors use extreme leverage (5x margin on trading apps), will see supercharged boom-bust cycles that mirror crypto, but this demographic shift is still a long-term tailwind for global equities.

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