Finance

'There is a clear trend toward higher price points.' How rich people are shrugging off inflation — and why that means more pain for you

Moneywise · Jul 23, 2026 12:40 · 9 min read

The K-shaped economy's toll on the middle class

“Unapologetic luxury” is making businesses cater toward their wealthiest patrons, leaving middle-class Americans in the dust.

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In the face of an increasingly K-shaped economy, businesses are abandoning middle-class buyers (1). Instead, they’re catering their products and services toward those who can afford to pay.

In the June Federal Reserve Beige Book, the Federal Reserve Banks of New York, Cleveland, Richmond and Atlanta all reported solid or increasing demand for luxury products, including luxury goods, travel and real estate (2). Many of them also reported weakening markets for similar lower-end products.

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Because of that, luxury goods providers such as Rolex have been able to get away with raising their prices, even as middle-class customers increasingly abandon the brands (3). For Rolex, its price increases hinge on the brand’s successful pitch that its products are investments, thanks to rising gold prices (4).

But these price increases aren’t just impacting luxury goods.

Everything from flights to animal care has seen similar pivots to luxury, leaving middle-class households increasingly stranded.

“Companies are saying, ‘Let’s just jack up the price as high as we possibly can and extract as much from the small set of wealthy people,’” says former U.S. Department of Treasury director Kitty Richards (5).

Here’s what’s being impacted by what the Fed calls “unapologetic luxury” and what that means for the people who are left behind.

Luxury brands and services aren’t the only ones raising prices

Companies such as Rolex and Cartier already cater to a wealthy clientele.

And indeed, overall jewelry prices have increased dramatically (6). As the prices of precious metals have skyrocketed, jewelers have adjusted their prices accordingly and wealthy investors have responded favorably, leaning on jewelry as an investment.

“Brands and retailers who cater to a higher-end clientele are doing quite well,” says Abe Sherman, chief executive of California-based jewelry consulting firm Buyers Intelligence Group. “There is a clear trend toward higher price points.”

Pet wellness is trending upward, too. High-income pet owners are paying as much as $14,000 per year on dog grooming, giving their pets peptides and treating them to fur-brightening masks (7). They’re also having to deal with mounting vet costs at the same time.

But not every market facing a similar problem is luxury-only.

Flights have also been getting more expensive (8). Faced with rising oil costs due to the Iran War, airlines have had to raise prices — or fold, as with Spirit Airlines (9). As a result, ticket prices are up 25%. Car prices are also up across both the new and used markets (10).

The middle class is “squeezing more life out of every dollar”

With the cost of everything increasing, the middle class is having to pick and choose what it can pay for.

In the June Beige Book, one of the Kansas Fed’s contacts said that “middle-income households are squeezing more life out of every dollar before deciding to spend it,” resulting in what the Kansas Fed calls “growing behavioral adjustments (2).”

This includes things like skipping restaurants. And when residents do go out to eat, they go for less expensive meals.

“In contrast, higher-income households remained largely insensitive to price pressures,” the Kansas Fed said.

The Atlanta Fed also noted “growing financial stress among middle-class households, particularly those who do not qualify for public assistance or are unfamiliar with available support resources.”

This indicates a K-shaped economy, where economic conditions cause upper-class people to do very well while lower-class people are increasingly struggling (11).

“When people talk about the K-shaped economy, they’re talking about an economy that is being experienced very differently across the population,” says Joanne Hsu, the director of the Consumer Sentiment Index at the University of Michigan (11).

A K-shaped economy isn’t necessarily sustainable (12).

If the lower half of a K-shaped economy is unable to afford necessities, individuals impacted could start defaulting on loans at higher rates (13). But as long as wealthy consumers keep spending, businesses have little reason to change course.

That doesn’t mean individual consumers are left entirely helpless.

Protect your finances from inflation’s bite

Just when most Americans thought inflation was finally cooling off, it's heating up again.

The conflict in the Middle East has reignited concerns about rising prices, with inflation climbing to 4.2% in May — its highest level in three years (14).

As higher energy costs ripple through the economy, middle-class consumers are once again feeling the squeeze every time they fill up their gas tanks, buy groceries, or pay their monthly bills. The financial strain is shifting from a seemingly temporary nuisance to requiring active management.

The vast majority of Americans (95%) believe the country is facing an affordability crisis, according to the Harris Poll (15). Even with stable unemployment and the stock market hovering near record highs, consumer confidence has taken a hit. What’s more, 57% of Americans now believe the economy is getting worse, up from 46% just a few months earlier, before tensions in the Middle East pushed energy prices sharply higher.

The silver lining? A handful of smart money moves can help you stretch your dollars further and position your portfolio to better withstand inflation.

Audit your fixed expenses

It's easy to focus on cutting little indulgences when money gets tight.

But while skipping your morning latte might save a few dollars, the biggest savings opportunities often come from reviewing the bills you pay automatically every month.

Recurring bills, like insurance, internet, cell phone plans and subscriptions, can quietly eat away at your budget month after month. Even trimming a single payment can free up hundreds of dollars over the course of a year without requiring major lifestyle changes.

Auto insurance is a good place to start.

The average American pays $1,084 for six months of coverage as of January 2026. That’s an 18% increase from a year ago (16).

If you haven't compared rates recently, you could be paying more than necessary.

Shopping around and comparing rates through services like Insurify can help you uncover cheaper options so you aren't paying a hidden ‘loyalty tax’ to your current insurer.

Here’s how it works: Just answer a few basic questions and Insurify will show you the most affordable deals in as little as three minutes.

Those who shop around and compare car insurance rates from different providers on Insurify and choose the best available deal save an average of $1,100 on annual premiums.

Not only is the process 100% free, but you could also save up to 15% by bundling your car and home insurance.

Invest in the stock market

One of the most effective long-term ways to stay ahead of inflation is to invest in assets that have historically outpaced rising prices.

The benchmark S&P 500 index has generated average annual returns of roughly 10.5% since 1957 (17). So far in 2026, the index has gained more than 9%, more than double the current inflation rate (18).

Of course, investing in stocks comes with risks.

Concerns over expensive technology stocks, shifting interest-rate expectations and geopolitical uncertainty have triggered sharp swings in the market over the past couple of years. That kind of volatility can be unsettling, especially if you're trying to pick individual winners.

That's why many experts recommend keeping it simple with a low-cost S&P 500 index fund.

Instead of trying to predict which company will outperform next, broad-market index funds allow you to own hundreds of America's largest companies in one investment, reducing the impact of any single stock falling out of favor.

Even legendary investor Warren Buffett has repeatedly endorsed this strategy, claiming it “makes the most sense practically all of the time.”

“The trick is not to pick the right company; the trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low-cost way,” he said in an interview with CNBC in 2017 (19).

Apps like Acorns make it easier by automatically rounding up everyday purchases to the nearest dollar and investing the difference in low-cost index ETFs.

Signing up takes just minutes: All you have to do is link your cards and Acorns will round up each purchase to the nearest dollar and invest the difference — your spare change — into a diversified portfolio managed by experts at leading investment firms like Vanguard and BlackRock.

With Acorns, you can invest in an S&P 500 ETF with as little as $5.

If you sign up today and set up a recurring investment, Acorns will add a $20 bonus to help you begin your investment journey.

Diversify with an inflation-proof asset

While stocks can help build long-term wealth, not everyone can stomach the associated risks.

During periods of elevated inflation or geopolitical uncertainty, investing a portion of your portfolio in assets that have historically held their value when other markets become volatile can be a smart strategy.

Gold has filled that role for centuries.

Unlike fiat currencies, which governments can print at will, the supply of gold is naturally limited. That scarcity has helped make it a popular hedge against inflation. Gold prices have more than doubled over the past five years, hitting multiple record highs along the way and outpacing the S&P 500 over the same period.

If you’re curious about adding precious metals to your broader inflation-hedging strategy, a gold IRA from Goldco lets you hold physical gold and other metals while still getting the tax advantages of an IRA.

They also offer a guaranteed buyback program, meaning they’ll repurchase your metals at the highest price according to market value if you ever decide to sell.

If you’re curious whether this is the right investment to diversify your portfolio, you can download your free gold and silver information guide today. You can also get up to 10% in free gold or silver on qualifying purchases.

Earn passive income from real estate

Another way to fight inflation is to create income that grows in tandem with it.

Building passive income can help offset rising living costs while reducing your reliance on a single paycheck.

Real estate has historically been a popular choice because both property values and rental income have generally increased over the long run, helping investors stay ahead of rising living costs.

And today, investing in real estate doesn’t necessarily mean taking out a mortgage, saving for a massive down payment, or dealing with tenants.

mogul is a platform that gives you the option to invest in shares of single-family rental homes nationwide. Founded by former Goldman Sachs real estate investors, its team handpicks the top 1% of single-family rental homes nationwide for you. This way, you can invest in institutional-quality offerings at a fraction of the usual cost — and all while receiving monthly rental income, real-time appreciation and tax benefits.

Mogul’s experts carefully vet each property, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average yearly return of 18.8%. Their cash-on-cash yields, meanwhile, average between 10% to 12% annually. With investments typically ranging between $15,000 and $40,000 per property, offerings often sell out in under three hours.

Getting started is quick and easy. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.

- With files from Kit Pulliam.

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'There is a clear trend toward higher price points.' How rich people are shrugging off inflation — and why that means more pain for you

Must Read

Luxury brands and services aren’t the only ones raising prices

The middle class is “squeezing more life out of every dollar”