A deep rift is opening up across the US economy — and markets aren’t pricing it in.
While tech giants and major banks continue to post blowout profits, a growing number of consumer-driven businesses are showing signs of strain, caught between rising input costs and cooling demand.
The surface looks calm. Underneath, turbulence is building.
“Too many investors are mistaking leadership from a handful of megacaps as a signal of broader economic health. It’s not. This is concentration, not confirmation,” says Nigel Green, CEO of global financial advisory giant deVere Group.
“We’re seeing one of the most acute divergences in years, and the potential for a sharp reset is rising.”
With more than half of S&P 500 companies having reported second-quarter results, the picture is increasingly two-tiered.
Tech and finance are delivering earnings growth of over 40% and 12% respectively, while consumer staples, materials, and industrial names are grappling with margin compression, despite revenue growth.
“That’s the giveaway,” explains the deVere chief executive.
“Costs are rising and companies are under pressure. But the illusion of strength persists because of just a few outsized winners.”
Meanwhile, Donald Trump’s sweeping tariff hikes — now imposed on countries including Canada, Taiwan, Switzerland and India — are quietly raising the cost of living for American families.
Yet they’re being treated as economic strategy rather than what they truly are: “Trump’s Main Street Tax.”
“These tariffs are inflationary by design,” Nigel Green warns. “They feed straight into household budgets. Consumers pay more, corporate costs rise, and if you’re a business that can’t pass those costs on? You’re getting squeezed.”
Still, the market is pricing in a soft landing. Stocks are rallying, volatility is subdued, and rate cuts are being anticipated before year-end — all while job creation slows and GDP growth drops to 1.1% in the first half of the year.
“That combination simply doesn’t add up,” says Nigel Green. “The risk isn’t just economic. It’s psychological. Markets have become conditioned to good news — but they’re ignoring the signals that tell us a storm could be approaching.”
Yet it’s not all downside.
“This divergence is also opportunity,” he notes.
“Periods of distortion are when disciplined investors can outperform. If you can look through the noise, assess the real risks, and position around them, you’ll be ahead of the pack when the adjustment comes.”
That means watching for mispriced assets in sectors unfairly punished by short-term cost pressures.
It means hedging exposure to vulnerable consumer segments while identifying companies with genuine pricing power and strong balance sheets. And crucially, it means staying globally diversified.
“The temptation to crowd into the same ten mega-cap names is understandable — but can also be dangerous,” says Nigel Green.
“Investors should be seeking advice and thinking about quality, not size. Breadth, not just bounce.
“We’re seeing incredible opportunity in select emerging markets, digital assets, and globally-exposed companies that will benefit as the dollar eventually weakens.”
At the same time, he cautions against assuming the Federal Reserve will rescue markets with aggressive easing, especially if Trump’s tariffs continue pushing up costs.
“Monetary and trade policy are pulling in opposite directions,” he comments. “This tension could limit the central bank’s room to manoeuvre. Investors need to account for that in their risk models.”
With earnings season exposing the cracks and macro data turning south, the coming months could bring greater volatility and sharper differentiation between winners and losers.
“Complacency is the biggest risk here,” concludes Nigel Green.
“But for investors willing to challenge the consensus and take smart, calculated positions, this divergence could also be the biggest chance in years to build lasting value.”