What to Buy as the 'K-Shaped Economy' Widens
McDonald's (MCD) just released an unusual new offering: grade-A caviar to spread on its Chicken McNuggets.
The fast-food giant shipped the fish eggs earlier this month as part of a limited Valentine's Day promotion.
The caviar kits sold out in minutes. Today, they're reselling for hundreds of dollars each on eBay...
Now, this might seem like a bizarre publicity stunt... But McDonald's knows what it's doing. The McNugget Caviar kit reflects an important reality of the modern consumer...
The "K-shaped economy" is likely to only widen from here. And investors would be wise to pay attention...
Profiting From Both Sides of a Divided Economy
Since the end of the COVID-19 pandemic, the economy has split. Wealthy Americans are spending more as stock market gains swell their bank accounts. And lower-income Americans are tightening their purse strings as they struggle with a falling dollar.
The result is an economy in the shape of a "K."
The top half of the K is the affluent half of the country. Their spending is going up over time. Meanwhile, the bottom half of the K is the lower-income demographic. Their spending is going down over time.
With McNugget Caviar, McDonald's is signaling to both sides of the K. It's telling Americans, "We may be the home of the Extra Value Meal... but we can be extravagant, too."
McDonald's recognizes the widening K-shaped economy. And it isn't the only restaurant grappling with it...
On a February earnings call, Chipotle Mexican Grill (CMG) announced that it, too, would seek to embrace its wealthier patrons.
As CEO Scott Boatwright explained...
After looking at the data last week, we learned that 60% of our core users are over $100,000 a year in average household income. That gives us confidence that we can lean into that group in a more meaningful way.
Chipotle is reacting to the same economic signals as McDonald's. As the K-shaped economy grinds on, fast-food restaurants are being forced to "serve two masters." They have to appeal to both high-income and low-income clienteles.
And the splitting of the economy isn't likely to stop anytime soon...
One rough-and-ready way we can see the K-shaped recovery is by comparing the performances of LVMH (LVMH) and Dollar General (DG).
These businesses take opposite approaches to the American consumer...
LVMH is a luxury-goods titan. It operates 75 respected luxury brands producing high-end fashion, jewelry, wine and spirits, perfumes, and more.
On the other hand, Dollar General is for the budget-conscious. This retailer sells products with low sticker prices and razor-thin margins.
In other words, LVMH caters to the top half of the K... and Dollar General caters to the bottom half.
By looking at the ratio between the share prices of LVMH and DG, we can see which theme is winning: luxury or budget. The ratio rises when luxury is outperforming... and falls when budget is in the lead.
The LMVH-to-DG ratio rose steadily beginning in 2016. It peaked in 2025 – and today, it's falling fast. Take a look...
So what changed in 2025 to cause this ratio to tank? Well, LMVH has kept just about flat since January 2025, going down just 4% in more than a year...
So it's not that LMVH has sold off. The change has been driven by a massive rally in Dollar General. See for yourself.
Dollar General has soared 108% since the start of 2025 as Wall Street pressed its bet on the K-shaped recovery. Today it sits at multiyear highs.
In short, the market is cheering businesses that serve lower-income folks.
At the same time, fast food is trying to court a higher-income clientele than we're used to seeing.
I encourage you to follow a similar "barbell"-style approach. Right now, you should own some luxury companies and some businesses appealing to the budget-conscious.
The K-shaped economy will reward companies serving both extremes of the wealth spectrum. Consider adding budget and luxury to your portfolio today.
Good investing,
Sean Michael Cummings
Further Reading
You don't protect and grow your wealth by forecasting exactly what's coming next. Instead, you prepare your portfolio for various possibilities. And right now, you need to keep an eye on these two trends as you position your portfolio for gains in 2026.
"Investing in stocks is always risky," Dr. David Eifrig writes. You can't escape the danger of losing everything in a drawdown. But instead of always trying to avoid the next crisis, you should follow one simple principle.
Market Notes
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Novartis (NVS)... pharmaceuticals
AstraZeneca (AZN)... pharmaceuticals
CareTrust REIT (CTRE)... health care REIT
Applied Materials (AMAT)... semiconductors
Toyota Motor (TM)... automotive manufacturer
Toll Brothers (TOL)... homebuilder
McDonald's (MCD)... burgers and fries
Yum Brands (YUM)... fast-food brands
Bunge (BG)... vegetable oils
Atmus Filtration Technologies (ATMU)... industrial filtration
Enbridge (ENB)... pipelines
Enterprise Products Partners (EPD)... oil and gas
Kinder Morgan (KMI)... oil and gas
Antero Midstream (AM)... natural gas
American Electric Power (AEP)... utility
CenterPoint Energy (CNP)... utilities
Dominion Energy (D)... utilities
FirstEnergy (FE)... utilities
Lockheed Martin (LMT)... "offense" contractor
NEW LOWS OF NOTE LAST WEEK
Intuit (INTU)... tax-prep software
GoDaddy (GDDY)... website hosting
Pinterest (PINS)... social media
DraftKings (DKNG)... sports-betting leader