Here's an odd economic moment: The biggest tech companies in the world just hit a combined valuation of $20 trillion, the stock market keeps setting records, and yet most Americans are convinced we're in a recession. Market strategist Adam Kobeissi is sounding the alarm that this disconnect isn't just awkward, it's about to get much worse.
When Wall Street And Main Street Stop Talking
Kobeissi pointed out on Monday that the Magnificent 7 stocks have officially surpassed $20 trillion in market capitalization. That's Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOGL) (GOOG), Meta Platforms Inc. (META), Microsoft Corp. (MSFT), Nvidia Corp. (NVDA), and Tesla Inc. (TSLA). These seven companies now make up 40% of the S&P 500, which is a staggering concentration of market power.
But here's where things get weird. While these tech giants are minting money and pushing indexes to new heights, 60% of Americans think we're in a recession. The S&P 500 is hitting record levels, yet young graduate unemployment in the U.S. is nearing 10%. It's the economic equivalent of two people looking at the same picture and seeing completely different things.
The response from governments and central banks has been predictable: stimulus packages and rate cuts, over 300 times in recent months according to Kobeissi. The problem? These massive tech companies don't actually need the help.
"These large cap technology stocks, which now make up 40% of the S&P 500, do NOT need rate cuts, particularly as inflation runs above 3%," Kobeissi said. "But, everyone else does."
The Rich Get Richer, And The Gap Gets Bigger
Kobeissi's warning is straightforward: this divide is going to intensify. "The gap between asset owners and non-asset owners will only widen as a result," he wrote, predicting that "nominal asset prices will rise." Translation: if you own stocks, real estate, or other assets, you're probably going to do fine. If you don't, you're going to feel left behind.
Economists have a term for what's happening: a "K-shaped" economy. Picture the letter K, with one line going up and one going down. That's essentially what's happening between wealthy Americans and everyone else. According to Apollo Academy's Chief Economist Torsten Slok, the Magnificent 7 stocks are leading this divergence, fueled by massive AI spending and the profits that have followed.
The data backs this up. The University of Michigan's Consumer Sentiment Index dropped to 50.3 in November, its lowest level since 2022. Most consumers remain deeply pessimistic about the economy's direction. But here's the kicker: the survey also noted that the wealthiest Americans were doing better than ever. It's a clear sign that we're living in two different economic realities.
Why This Matters Now
The tension between soaring stock valuations and weakening consumer confidence isn't just an academic curiosity. It has real implications for policy, markets, and social stability. When the Federal Reserve cuts rates to help struggling households, it also pumps up asset prices, which primarily benefits people who already own assets. It's a feedback loop that makes inequality worse, not better.
Even as inflation runs above 3%, policymakers feel pressure to keep cutting rates because so many people are struggling. But those rate cuts end up inflating the valuations of companies that are already doing phenomenally well. The Magnificent 7 don't need monetary stimulus, they're sitting on mountains of cash and posting record profits. But the policy tools designed to help Main Street keep accidentally helping Wall Street instead.
Kobeissi's message is that this isn't going to resolve itself naturally. As long as policy remains focused on broad measures like interest rates, and as long as the stock market remains concentrated in a handful of mega-cap tech companies, the gap between asset owners and non-asset owners will continue growing. Nominal asset prices will keep rising, which sounds great if you own assets, and sounds terrible if you don't.