WTF Friday (aka Jargon Alert): K Shaped Economy

By Patrick Diamond, CFP®

A “K-shaped economy” refers to an economic recovery or expansion in which different groups, industries, or income levels move in divergent directions—some rising while others decline—much like the two branches of the letter “K.” This phenomenon popped onto the radar screen during the Covid period when the economy would see “rolling recessions” alternating between the services side of the economy (we couldn’t travel during shut down) and the goods sector (we bought a ton of goods during shut down). Over the past few years, this pattern has become more pronounced: some assets, and the technology and financial sectors have continued to grow, while others have struggled to keep pace. Inflation, automation, remote work, and higher interest rates have accelerated this dichotomy, creating uneven access to opportunity and wealth accumulation. In a K-shaped economy, the question is not simply whether the economy is improving—but for whom.