Seven Grey Swans a Swimmin’ in 2025: #3 Death of the Middle Class

“I believe we are on an irreversible trend toward more freedom and democracy – but that could change.”

–Dan Quayle

December 27, 2024— Are you better off now than you were four years ago?

That question, which Ronald Reagan first asked voters in 1980 after four inflationary years of the Carter presidency, resonated. It’s no wonder Donald Trump brought it back successfully in 2020.

The past four years, inflation hasn’t been terrible compared to the 1970s and 1980s. But in a world of 2% inflation expectations, the jump to 9% was huge. It caused millions to see, in real-time, the cumulative damage inflation does.

For wealthier Americans, inflation may have been painful, but it was also beneficial. That’s because inflation tends to mean rising asset prices.

For instance, since 2020, the Case-Schiller home price index has risen 47%. If you owned a “median” home valued at $300,000, it’s now likely worth closer to $450,000, plus or minus your local market conditions.

A $1 million home? Closer to $1.5 million.

And let’s not forget the stock market over the past four years, which has nearly doubled. Even the 2022 bear market is starting to look like just a speed bump in the rear-view mirror.

It’s no wonder that the four wealthiest Americans, Elon Musk, Larry Ellison, Warren Buffett, and Jeff Bezos, now have a combined wealth of $1 trillion.

But for millions of Americans who don’t own a home or invest in a 401(k) plan, rising inflation means lower take-home pay.

Food costs are up over 20% over the past few years. As are rents.

And next year, when Donald Trump starts ratcheting up tariffs again, there will be more pressure for prices on goods to rise even further. That will make it harder to keep prices down.

Time magazine reported that if Trump gets the full tariffs he has in mind, consumer prices could rise as much as 5.1%. That’s likely more than enough to offset any savings consumers might see from deregulations or a small reduction in tax rates.

When you’re on the liability side of inflation, it’s painful. And more and more Americans are falling behind.

This increasing wealth inequality, combined with tech trends that include major advances in AI and robotics, could lead to another Grey Swan event: the death of the middle class.

Grey Swan #3: Death of the Middle Class

The middle class, long considered the engine of our economy and the embodiment of our national values, is shrinking at an alarming rate, fundamentally altering America’s social and economic landscape.

According to a recent Pew Research Center study, the share of Americans living in middle-class households has plummeted from 61% in 1971 to just 51% in 2023. And bear in mind, the U.S. population has increased by 67% since then.

As the middle class contracts, the rift between lower-class and higher-class Americans grows wider.

From 1970 to 2022, middle-class incomes increased from $66,400 to $106,100, barely keeping pace with inflation.

Over that same time, upper-income households saw their median income skyrocket by 78%, from $144,100 to $256,900.

But as prices have risen, the middle class’s share of total U.S. household income has plummeted – from 62% in 1970 to just 43% in 2022.

Turn Your Images On

The middle class is disappearing, bleeding into upper and lower-income groups.

Chances are, if you’re reading this, you’re movin’ on up. Let’s make sure it stays that way.

One way to do so is to invest in some of the latest technologically transformative trends. As Grey Swan Investment Fraternity contributor and AI expert Zoltan Istvan recently told paid-up members of our fraternity:

If we just go back about two years, to when most people used ChatGPT for the first time, we see that the increased use and evolved complexity of AI is almost a straight line up on a J-curve graph.

In other words, the world is changing at an accelerating pace. The best way to ensure you’re not left behind is to invest in some of today’s top tech trends, as well as with assets that have massive return potential, such as bitcoin.

Regards,

Addison Wiggin,
Grey Swan

P.S. It’s not too late to review some of our most recent research in the tech space, including what we call “Quantum Energy.” We’ve identified several companies developing this technology, which is the key to fully unlocking AI’s potential.

There are many ways to play this trend, depending on your comfort level. While we believe that investors should focus on safety first, playing growth trends is crucial to growing your wealth above and beyond inflation’s incessant bite.

Your thoughts on the top Grey Swan events of 2025 are welcome here: addison@greyswanfraternity.com.

“I believe we are on an irreversible trend toward more freedom and democracy – but that could change.”

–Dan Quayle

December 27, 2024— Are you better off now than you were four years ago?

That question, which Ronald Reagan first asked voters in 1980 after four inflationary years of the Carter presidency, resonated. It’s no wonder Donald Trump brought it back successfully in 2020.

For wealthier Americans, inflation may have been painful, but it was also beneficial. That’s because inflation tends to mean rising asset prices.

A $1 million home? Closer to $1.5 million.

And let’s not forget the stock market over the past four years, which has nearly doubled. Even the 2022 bear market is starting to look like just a speed bump in the rear-view mirror.

It’s no wonder that the four wealthiest Americans, Elon Musk, Larry Ellison, Warren Buffett, and Jeff Bezos, now have a combined wealth of $1 trillion.

But for millions of Americans who don’t own a home or invest in a 401(k) plan, rising inflation means lower take-home pay.

Food costs are up over 20% over the past few years. As are rents.

And next year, when Donald Trump starts ratcheting up tariffs again, there will be more pressure for prices on goods to rise even further. That will make it harder to keep prices down.

When you’re on the liability side of inflation, it’s painful. And more and more Americans are falling behind.

This increasing wealth inequality, combined with tech trends that include major advances in AI and robotics, could lead to another Grey Swan event: the death of the middle class.

Grey Swan #3: Death of the Middle Class

As the middle class contracts, the rift between lower-class and higher-class Americans grows wider.

From 1970 to 2022, middle-class incomes increased from $66,400 to $106,100, barely keeping pace with inflation.

Over that same time, upper-income households saw their median income skyrocket by 78%, from $144,100 to $256,900.

But as prices have risen, the middle class’s share of total U.S. household income has plummeted – from 62% in 1970 to just 43% in 2022.

Turn Your Images On

The middle class is disappearing, bleeding into upper and lower-income groups.

Chances are, if you’re reading this, you’re movin’ on up. Let’s make sure it stays that way.

If we just go back about two years, to when most people used ChatGPT for the first time, we see that the increased use and evolved complexity of AI is almost a straight line up on a J-curve graph.

Regards,

Addison Wiggin,
Grey Swan

Your thoughts on the top Grey Swan events of 2025 are welcome here: addison@greyswanfraternity.com.

For 30 years, Japan was the land where interest rates went to die.

The Bank of Japan used yield-curve control to keep long-term rates sedated. Traders joked that shorting Japanese bonds was the “widow-maker trade.”

Not anymore.

On November 20, 2025, everything changed. Quietly, but decisively.

The Bank of Japan finally pulled the plug on decades of easy money. Negative rates were removed. Yield-curve control was abandoned. The policy rate was lifted to a 17-year high.

Suddenly, global markets had to reprice something they had ignored for years.

What happens when the world’s largest creditor nation stops exporting cheap capital and starts pulling it back home?

The answer came fast. Bond yields in Europe and the United States began climbing. The Japanese yen strengthened sharply. Wall Street faltered.

The rate cut narrative is calcifying into gospel: the Fed must cut to save the consumer.

Bankrate reports that 59% of Americans cannot cover a $1,000 emergency without debt or selling something. And yet stocks are roaring, liquidity junkies are celebrating, and the top 10% now account for half of all consumer spending.

Here’s the plot twist: before 2020, consumer confidence faithfully tracked equity markets. After 2020, that relationship broke. As one analyst put it, “The poor don’t hate stocks going up. They just don’t feel it anymore.”

So when the Fed cuts rates in one of the hottest stock markets in history, who exactly benefits? Not the 59%. Not the middle. Certainly not anyone renting and watching shelter inflation devour their paycheck.

Only the late-stage dot-com fever dreams did better in recent memory — back when analysts were valuing companies by the number of mammals breathing inside the office.

For the moment, stocks appear unsinkable, unslappable, and perhaps uninsurable. But this is what generational technology shifts do: they take a kernel of genuine innovation and inflate a decade of growth into a 36-month highlight reel. We’ve seen this movie. It premiered in 1999 and closed with adults crying into their PalmPilots.

And just as the internet continued reshaping the world long after Pets.com curled up and died, AI will keep marching on whether or not today’s multiples survive a stiff breeze. The technology is real. The valuations, however, will eventually need to stop hyperventilating and sit down with a glass of water.

Wheelbarrows are not chickens. A chicken is a biological production unit. A wheelbarrow is a capital good. A wheelbarrow doesn’t produce work. But it CAN be a productivity multiplier.

And that’s how we have to think of all those GPUs the hyperscalers are spending money on. If their thesis is right, trillion in AI and data center spending now, will translate into a massive burst in productivity and new technologies in the next two decades. That is the only justification for the current valuations/multiples at which these stocks trade now.

The American poet William Carlos Williams wrote, “So much depends, upon a red wheelbarrow, glazed with rainwater, beside the white chickens.”

Today the wheelbarrow is Nvidia Green. And so much of the stock market depends on that wheelbarrow being a big enough productivity multiplier to offset $340 trillion in debt.