Investing 2026: Navigating the "Jenga Tower Economy"

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My son Joey’s first semester at Boston’s Berklee College of Music ended for Christmas break late last week. And thanks to some unexpected developments (ah … the joys of parenthood), I had to make my own “Cannonball Run” from Baltimore to Boston and back again in a day and a half.

I picked up my son (along with his backpack, twin suitcases and two guitars) off the busy Back Bay street in front of his dorm — it felt like a Special Forces rescue mission — and immediately headed back toward New York City, New Jersey, Delaware — and Maryland.

But by the time we hit Connecticut, it was getting dark — and I suddenly had a bit of inspiration: Why not stop in Middletown, the city I was born in but hadn’t been back to in 50 years, and stop for dinner at Illiano’s — one of those real Italian food joints where the garlic smell overwhelms you the second you walk through the door (and that serves the best spaghetti with meat sauce I’ve ever had).

I had a second goal: I wanted to show Joey the wood-frame rental on Lake Street that we lived in for a year or so in 1966 or ’67.

Joey said Downtown Middletown was like one of those quaint places you only see in Hallmark Channel Christmas flicks.

And you know what? He’s right.

From the downtown I knew to drive down Middletown’s Main Street and along Pameacha Pond — to Lake Street.

I found the house easily. It was smaller than I remember (hey, I was five — everything was big back then).

I’m telling this story for a reason. After we got home (and I slept for 16 hours), I got curious: What would that tiny house that we rented back in the middle ‘60s sell for in today’s market?

I turned to Redfin. And I was stunned.

Stunned.

Remember, this is a house on a postage-stamp lot (under a tenth of an acre) that was built in 1900. The last time it sold — back in 2016 — it went for $182,500. Less than a decade later, Redfin and the other online real-estate sites say that same house will sell for $318,000 to $385,000.

Our house in Maryland — in an expensive Baltimore suburb, in a great school district — is twice as big, with a 10x bigger lot and is 75 years newer. We paid $183,000 in 2000. And based on Redfin estimates – and what I’ve seen nearby houses sell for — I think our place could fetch $600,000 or better.

American home prices have zoomed since the COVID-19 Pandemic. A whole lot.

In fact, we’re experiencing a housing affordability crisis — with only three of the Top 50 U.S. metro markets are remotely affordable, Realtor.com said in a report released this summer.

Five years ago, nearly 60% of Americans could afford the typical house. Today it’s only 38%. U.S. homeowners now need 44% of their pretax income to pay their mortgage — far above the 30% level that’s viewed as “safe.”

America’s housing-affordability squeeze has been seismic and sudden. And it’s the latest block to be tapped out of the base of what some economists refer to as the “Jenga Tower Economy” — an alarming new reality where America’s Middle Class consumers are running on fumes and spending by the nation’s rich is all that’s protecting that “tower” from a total collapse.

Our SPC Premium readers are already familiar with this concept, as the Publisher of SPC first talked to them about this in November.

We’ve all played Jenga — the tower-of-blocks challenge where the loser brings it all down. In the economy version, we could individualize blocks with such labels as housing affordability, consumer confidence and more.

In a market where the richest 10% of households account for half of consumer spending — the most in history — that’s created a very real risk … and one we’ve never seen before.

“It makes the economy highly vulnerable if anything goes off the rails for those high-income, high-net worth households,” Mark Zandi, the chief economist for Moody’s Analytics, told The Los Angeles Times in early November. For instance, a correction in stocks “would knock the wind out of these high-income households — the last pillars of strength in the economy — and raise the risks of recession.”

I’ve been telling you about the “Middle Class Squeeze” — and the “Death of the American Dream” — for some time.

My back-and-forth to Boston gave me a reason to talk about it again here today. And so, too, does the end of the year. As we prepare our new storylines and new research for the New Year, we’re creating a “Watch List” of hot points we’re analyzing and tracking.

I’m putting my own labels on those Jenga Tower blocks. For you.

Am I predicting a tower collapse? No.

Is it possible? Absolutely.

But knowing what’s happening and why, and understanding how the stocks are priced, how the markets trade and how the economy works … that’s what separates Wealth Builders from Wealth Killers.

Wealth Killers think of it as a “worry list” — because they’re driven by, and act on, emotion. But Wealth Builders like us — who think and analyze objectively, and who act with purpose — understand that it’s a “watch list.”

So here’s the first installment of my “Jenga Tower Economy Watch List.”

The Affordability Factor

Affordability is somewhat synonymous with “inflation” — you know, how much have prices risen. But there’s another part: How much have incomes risen?

Housing is an important component of this: It’s the single-biggest part of most household budgets – and is the biggest purchase most people ever make. U.S. housing prices have zoomed 27% since 2020 — and are up 60% in some Florida markets (Tampa and Miami), 66% in Idaho (Boise is now more than just potatoes), and 50% in Texas (like Austin).

(That little Lake Street house: Its value is up 111% since it last sold in 2016.)

Consumer prices in general are up 20% to 25% (most analysts put the general number at 22%). Again, though, there’s a range. Take rents: One-bedroom apartments are up 41% (to $457 a month) in the 50 largest U.S. cities, while two-bedrooms are up 37% ($505 a month).

Food is up 23.6%. Restaurant meals have surged more than 25% -- with “tipflation” exacerbating that jump.

Car insurance is up as much as 40% — with pricey sensors, composite materials and the proliferation of computer chips ramping up the cost of auto repairs.

Rising prices have squeezed all but America’s rich.

Median household income (the Middle Class) is up 15% to 20% — from $54,000 in 2020 to $62,000 now.

Upper-income households (starting at double the median) is up 15% nominally, from $108,000 then to $124,000 today.

The “Wealth Gap” has widened substantially. The “cutoff” for the Top 1% — the wealthiest American households — was $11 million in 2020. Now it’s as much as $18 million.

And the Top 10% now control 70% of all American wealth — a fact important in the “Jenga Tower Economy.”

So let’s talk about that part of the Watch List next.

The Wealth Effect

Here in late 2025, American household net worth is about $156 trillion, says flow of funds data from the U.S. Federal Reserve.

If that Top 10% controls 70% of that, we’re talking about a combined net worth of $109 trillion. The Top 1% controls 32% of all that wealth — or $50 trillion.

That’s almost as much as the single-year economic outputs of the United States ($30.6 trillion) and China ($19.4 trillion).

And it dwarfs – massively — the median household net worth of $193,000.

In the Jenga Tower Economy, the Wealth Gap matters more than ever because of something called the “Wealth Effect.”

The Wealth Effect is pretty simple: When stocks, bonds, precious metals and other assets surge in value, their owners feel more confident and spend more — even if their “income” (what they make from their everyday job) hasn’t changed.

That matters a lot now because the confidence of the wealthy Americans we’ve been talking about are based more on asset prices than job salaries.

American net worth is up $46 trillion (about 42%) since 2020. And that Top 10% that’s driving half the economy has reaped 70% of that — or more than $32 trillion.

A big pullback in stocks, a collapse in Bitcoin or gold or silver, or an (unlikely) plunge in real-estate prices could put a big dent in rich folks’ optimism. That would put more pressure on Middle Class consumers to take up the slack — which, as we’ll see here next, may not happen.

That could pull out one or more of the key “jenga blocks” — creating a “negative wealth effect,” a kind of financial negative-feedback loop that could cause the American economy to stumble, or trip and fall into a recession.

Beware of the Emotion Switch

The Middle-Class Squeeze is real. It’s taken decades to get to this point — but it’s accelerated since the pandemic.

The numbers vary a bit here and there. Median household income was about $84,000 last year. But inflation has gnawed away at real buying power.

And household debt is now at record levels — up a staggering $4.4 trillion since the end of 2019.

It hit an all-time high $18.6 trillion here in the third quarter, breaking down as:

• $13.1 trillion in mortgage debt.

• $1.23 trillion on credit cards.

• $1.66 trillion owed on cars.

• And another $1.65 trillion for school loans.

That’s a ton of debt — and the strain is showing. Credit limits are rising — a double-edged sword when borrowing costs are above 22% and balances are climbing.

Delinquencies — especially in autos and credit cards — are rising, especially among low-income folks. In the middle/lower incomes, high home prices have forced folks to be renters; but even apartments or houses are pricey to lease.

The middle-wealth slice of the economy (in the 50^th to 90^th percentile) holds about 30% of the nation’s net worth.

A multi-decade slide reversed after the pandemic — but now it’s skidding again … tightening the squeeze. At least one in 10 U.S. households have no net worth at all.

Emotion

The stock market and the economy share that “X factor” — confidence.

Confidence is the positive side of emotion. And it lives in abundance when companies are hiring, the economy is growing, home prices are high (meaning home equity is increasing), corporate profits are strong and stock prices are rising.

Those are some of the labels written in black Sharpie on those Jenga blocks that keep the economy tower strong and high.

Insecurity — doubt — is the negative side of emotion. It assumes the dominant position when things go bad. And that doubt is represented by the empty spaces emotion creates when those Jenga blocks are pulled free and tossed to the side.

Pull out too many of those blocks, and the tower won’t stand.

I’ll be following up with “Action to Take” opportunities that will build your wealth. (In fact, we already have some we’re researching right now.)

That’s why we’re here. That’s what we do for you.