Inflation makes essential items unaffordable for roughly half of Americans

A sustained policy response—wage growth outpacing inflation, targeted subsidies for essentials, or aggressive Fed rate cuts restoring purchasing power—would likely ease margin pressure on consumer staples and reduce recession probability, potentially supporting equities and lowering volatility.

Continued affordability stress without policy intervention would plausibly keep consumer discretionary spending depressed, sustain elevated default risk in lower-income cohorts, and maintain a structural drag on GDP growth and corporate earnings.

If affordability deteriorates further—triggering widespread payment defaults, a sharp contraction in consumer spending, or social/political instability that disrupts supply chains or policy—the mechanism would be a feedback loop into recession, credit stress, and broad-based equity and credit market repricing.