Meredith Whitney, once dubbed the Oracle of Wall Street for predicting the collapse of big banks ahead of the 2008 financial crisis, is warning that the U.S. economy could be headed for new turbulence. In an interview with MarketWatch, the financial analyst cautioned that the country is showing signs of becoming a “bifurcated economy,” in which wealthier households continue to spend, while lower-income consumers struggle with mounting pressures.
The divide is already showing up in consumer data. In February, Moody’s Analytics analyzed Federal Reserve figures and found that households earning $250,000 or more were responsible for nearly half—49.7%—of all consumer spending. Three decades ago, that share was just 36%.
Whitney told MarketWatch that stagflation—marked by slowing growth, higher unemployment and persistent inflation—is a “real possibility.” That environment, she added, could put significant stress on value-oriented retailers. “I think the dollar stores are going to be challenged — we’ll see in a couple of weeks when they report — because their customer base will be the most economically challenged,” she said.
Commercial real estate professionals surveyed by GlobeSt.com offered more nuanced takes on what a bifurcated economy might mean for the retail sector. Jonathan Hipp, head of the U.S. Net Lease Group at Avison Young, believes retail overall remains relatively well-positioned, though he agreed that discount chains face risks. “The hardest hit are the people who shop at the dollar stores,” Hipp said. Still, he noted that economic stress could also push shoppers from slightly higher income brackets toward discount outlets.
For property owners, the changing landscape underscores the need for flexibility. “For landlords, that means curating a tenant mix that serves the full spectrum of consumers,” Joe Aristone, chief revenue officer at PREIT, told GlobeSt.com.
Others see opportunity for higher-quality assets. Michael Jerbich, president of real estate at GA Group, said a bifurcated economy could accelerate a “flight to quality” in retail real estate. Properties in affluent or growing areas—particularly those anchored by home improvement chains, essential retailers or strong discounters—tend to outperform, he noted.
On the West Coast, Paragon Commercial Group, which develops and operates what it calls “necessity retail,” views the sector as a defensive strategy in uncertain times. “Even with consumer economic bifurcations, necessity retail is a risk-off hedge to volatility,” Paragon Principal Jim Dillavou, said. “It tends to be extremely resilient in economic fluctuation.”
But resilience can shift as consumer behavior evolves. Dillavou pointed out that office-supply retailers once seemed like stable tenants—until online shopping eroded margins. Chains such as Big Lots, Bed Bath & Beyond, Party City and JOANN have since disappeared. Today, discount retailers, quick-service restaurants, medical tenants and even fitness centers are emerging as the categories best able to withstand downturns.
“I would not have put fitness in that category 10 or 15 years ago,” Dillavou said. “But they’ve become great.”
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