A surging stock market coupled with stagnant wage growth and persistent inflation has exacerbated the U.S. wealth gap in recent years. This phenomenon is known as a K-shaped economy in which the two “arms” of the letter K represent the prosperity of higher-income Americans rising and the fortunes of lower-income Americans declining. The top 10% of American earners now account for roughly 50% of all consumer spending, a record high, according to data dating back to 1989.
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Here are seven luxury stocks to buy that could be big winners in a K-shaped economy, according to Bank of America analysts:
| Stock | Implied upside |
| Estee Lauder Cos. Inc. (ticker: EL) | 48% |
| Viking Holdings Ltd. (VIK) | 4% |
| Toll Brothers Inc. (TOL) | 36% |
| Ralph Lauren Corp. (RL) | 35% |
| Wynn Resorts Ltd. (WYNN) | 57% |
| Hyatt Hotels Corp. (H) | 18% |
| Ferrari NV (RACE) | 21% |
Estee Lauder Cos. Inc. (EL)
Estee Lauder is one of the world’s leading skin care, makeup, and fragrance product manufacturers and marketers. Estee Lauder owns many category-leading brands, including Estee Lauder, Clinique and MAC Cosmetics, and its large scale provides significant cost advantages. Analyst Ashley Wallace says weak travel demand in China and Asia has weighed on Estee Lauder’s sales numbers and share price in recent years, but she is encouraged by the company’s “Beauty Reimagined” turnaround plan. The plan includes goals of returning to revenue growth and double-digit margins. Bank of America has a “buy” rating and $120 price target for EL stock, which closed at $80.83 on May 14.
Viking Holdings Ltd. (VIK)
Viking is a high-end cruise line operator that offers river, ocean and expeditionary voyages. The company’s fleet of more than 100 ships cruises 21 rivers, five oceans and all seven continents. Analyst Andrew Didora says Viking deserves a premium valuation relative to other cruise stocks because of its focus on luxury travel, which generates more earnings before interest, taxes, depreciation and amortization per passenger than lower-end cruise lines. Didora says Viking also has better net leverage and a higher return on invested capital than its competitors. Bank of America has a “buy” rating and $90 price target for VIK stock, which closed at $86.72 on May 14.
Toll Brothers Inc. (TOL)
Toll Brothers is a U.S. luxury homebuilder with a strong presence in the mountain, coastal and Sun Belt markets. The company has its own engineering, architectural, land development, mortgage, title, smart home technology, building components manufacturing, and landscaping businesses. Analyst Rafe Jadrosich says there are plenty of things for investors to love about Toll Brothers, including its exposure to favorable regions and demographics. Jadrosich is also bullish on the stock’s valuation and its land portfolio, which should create a long runway for healthy margins. Bank of America has a “buy” rating and $180 price target for TOL stock, which closed at $132 on May 14.
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Ralph Lauren Corp. (RL)
Ralph Lauren designs and sells men’s and women’s apparel, fine watches, jewelry, accessories and other premium lifestyle products. The company’s top products include polo shirts, knitwear, sweaters and tailored clothing. Analyst Kendall Toscano says Ralph Lauren’s positive revenue and margin trends give him confidence its stock has significant upside. Toscano says the company has margin-accretive growth opportunities over the long term that will facilitate earnings upside and create value. He says Ralph Lauren also has sustainably higher average unit retail prices and margins than its competitors. Bank of America has a “buy” rating and $450 price target for RL stock, which closed at $334.05 on May 14.
Wynn Resorts Ltd. (WYNN)
Wynn Resorts designs, develops, constructs, finances and operates high-end casino resorts. Some of its largest properties are the Wynn and Encore resorts on the Las Vegas Strip and Wynn Palace in Macao. Analyst Shaun Kelley says Wynn has outperformed other casino operators in a difficult Las Vegas market, reporting only a 1% drop in revenue per available room in the first quarter compared to an 8% decline for all Strip operators. In addition, Kelley says investors should be excited about Wynn’s United Arab Emirates development. Bank of America has a “buy” rating and $150 price target for WYNN stock, which closed at $95.43 on May 14.
Hyatt Hotels Corp. (H)
Hyatt Hotels is a global hotel owner and operator. Its leading brands include Hyatt Place, Hyatt Regency and Park Hyatt, and some of its largest upscale hotels include the Manchester Grand Hyatt San Diego, Hyatt Regency Chicago and Hyatt Regency Orlando. Kelley says Hyatt is an excellent stock for investors looking to profit from a recovery in the lodging business given the company’s impressive net unit growth and its high exposure to fee-based revenue. He says Hyatt also has room for earnings multiple expansion. Bank of America has a “buy” rating and $200 price target for H stock, which closed at $169.98 on May 14.
Ferrari NV (RACE)
Ferrari is a high-performance luxury carmaker with a long history in the Formula 1 racing world. Ferrari also has a world-class research and development team. The company’s 2026 model lineup includes the Amalfi, the Purosangue and the 296 GTB/GTS plug-in hybrid. Analyst Horst Schneider says Ferrari’s recent share price underperformance is a buying opportunity. He says Ferrari’s order book provides long-term financial visibility, and management’s 2030 guidance of more than 30% EBIT (earnings before interest and taxes) margin is likely overly conservative. Bank of America has a “buy” rating and $403.27 price target for RACE stock, which closed at $332.21 on May 14.
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Top 7 Stocks to Buy for a K-Shaped Economy originally appeared on usnews.com