Last month, Barron’s pointed out that the U.S. economy is “K-shaped.” In other words, wealthier Americans, powered by the stock market’s strength, are in good shape financially, while poorer consumers who don’t own equities are struggling because the labor market is weak and inflation remains elevated, partly due to tariffs.
Since consumer spending accounts for about 70% of U.S. GDP, lower outlays by the working class and the middle class could cause economic growth to decelerate sharply in 2026. Additionally, AI stocks’ rally, which many view as a bubble, could end. If one or both of these scenarios, which would cause equities to correct sharply, unfold, then the Schwab US Dividend Equity ETF (SCHD) could outperform the stock market by a wide margin. Additionally, the ETF’s sizeable dividend yield would effectively “pay investors to wait” for the equity market to recover and could enable SCHD to get a big boost from lower interest rates.
