The Chaos Continues
The Top 10%, Tariffs, and the Tale of Williams Sonoma: A Week in the Economy
I was struck this week by a podcast called Raging Moderates with Scott Galloway and the token Democratic member of the Fox Five, Jessica Tarlov.
She asked Scott about the stock market making new highs despite the chaos and confusion around tariffs and inflation. Scott replied that 10% of Americans own 93% of the total domestic stock market value. So, 90% of Americans own only 7% of the stock market.
Those 10% of Americans have been the primary beneficiaries of the TCJA Act of 2017, as well as the latest tax and spending budget bill. Similar to the "vibeconomy" mentioned in last week’s newsletter, Americans in general are still sour on the economy and are more reflective of the general economic mood of the country. Meanwhile, the top 10% keep buying stock and are the primary beneficiaries of the “wealth effect.”
In the same podcast, Scott tells a story from early in his career when he was starting a branding firm and landed Williams Sonoma as a client for developing their website. The original proposed fee was $250k, but because Scott was just starting his firm and Williams Sonoma was such a desirable client, he called the CMO to offer a discount.
The CMO responded, “No, don’t do that,” explaining that Williams Sonoma was making an investment in his company. He believed that vendors should be fairly compensated so their employees can be paid well—and in turn, produce their best work.
Scott cited this as a formative experience that showed capitalism working at its best—everybody wins. This really resonated with me in terms of how we treat our clients and our team: we strive to create win/win relationships.
Economic Snapshot: “The Weirdest GDP Report Ever”
In other news on the economy, the Department of Labor reported 2nd quarter GDP growth just above 3%—an impressive top-line number compared to the 1st quarter’s -0.5%. Markets rallied mildly.
While the growth rate was above expectations, it was skewed by trade and tariff-related fluctuations: imports surged in Q1 and reversed in Q2, making the rebound seem stronger than it may truly be.
📰 Read the WSJ Editorial: "The Weirdest GDP Report Ever"
As for trade policy, August 1st was the original deadline for tariffs, but that has been moved to August 7, except for Canada.
The Fed left interest rates unchanged during their July meeting, and Fed Chair Powell is keeping all options open for September. Notably, two Fed Governors voted to decrease interest rates, breaking from the usual consensus—suggesting internal division within the Fed amid continued pressure from President Trump to lower rates.
In short: the chaos continues.
