For Americans already anxious about job security in the age of artificial intelligence, Friday's economic data delivered a heavy blow: the reality of stagnant hiring was laid bare.

But for capital owners, the data highlighted a starkly different reality. Even as the job market deteriorates, investors expect the Federal Reserve to step in and shield them from economic headwinds – and they're wagering hundreds of billions of dollars betting that asset prices will rise.

This doesn't mean the stock market is invincible. Due to weakening hiring trends highlighting risks to future corporate earnings, stocks declined moderately on Friday. Bonds rallied, providing some cushion for diversified portfolios, while equities remain near historic highs, experiencing the strongest cross-asset rally in four years.

Despite Friday's report exposing pressures on the real economy, markets continue to show resilience. Non-farm payroll growth was minimal, unemployment climbed to its highest level since 2021, and revisions confirmed this round of growth as the worst since the pandemic. Yet looking through the lens of financial markets, signs of economic weakness are barely visible: the Russell 2000 small-cap index has risen for five consecutive weeks, and credit spreads hover near decade lows.

"For those who own financial assets and real estate, their wealth never seems to ebb," said Peter Atwater, adjunct professor at the College of William & Mary. "But for those at the bottom, their income is being affected, and due to lack of asset ownership, they're struggling considerably."

Rate cuts are intended to ease the burden on indebted households and support job seekers. But in reality, financial markets receive the bigger boost. Rising asset values provide portfolio cushions, enabling consumption to continue even when wage performance lags.

"This wealth boost supports consumption, which is the biggest driver of the economy," said Jeffrey Rosenberg, portfolio manager at BlackRock. "This alleviates concerns about job market slowdown."

A new analysis from the Congressional Budget Office shows income divergence will only widen further. President Donald Trump's "Big Beautiful Bill" would cause the lowest-income 10% of households to lose approximately $1,200 annually, further reducing already stretched incomes by 3.1%. Meanwhile, the wealthiest 10% would gain an average of $13,600, a 2.7% increase. The legislation redistributes wealth upward, further widening income gaps caused by insufficient labor market momentum.

Alongside this fiscal tilt, monetary conditions also favor asset holders. For many, labor market slowdown is more good news than threat: lower borrowing costs promise to boost portfolios, reduce mortgage costs for those able to buy homes, while corporate tax cuts and earnings tax deductions add icing on the cake. Traders now expect about six rate cuts by the end of next year – such a policy shift is almost unprecedented with inflation so persistent and stock markets so buoyant.

The scale of betting is evident. Before Friday's payroll report, Wall Street assets across all classes were poised for their best quarterly performance since mid-2021. As traders increased rate cut bets, bond ETFs attracted a record $49 billion in August, gold hit all-time highs amid dollar weakness and fresh questions about Fed independence.

Until recently, easing policy with inflation above 3% and soaring stock markets was rare. The S&P 500 has climbed 9% over the past three months – such gains on the eve of rate cuts hadn't occurred in the twenty years before last year.

For some, there's reason for concern. When the Fed began cutting rates a year ago, 10-year Treasury yields climbed a full percentage point in just four months. Now, traders are betting on curve steepening – short-end yields pulled lower by Fed cuts while long-term yields rise on inflation concerns.

"If the long end of the curve rises when the Fed cuts rates, then the stock market will likely get sold off because inflation concerns resurface," said Jeff Muhlenkamp. "I would bet gold prices would also jump," having increased his fund's gold exposure.

But in the Trump era, investors have repeatedly been punished for skepticism. Wall Street increasingly believes that if conditions deteriorate, Trump and Treasury Secretary Scott Bessent will intervene. The Trump administration's abandonment of its harshest tariff threats after April's stock market selloff is seen by many as precedent.

"This is a 'buy the dip' mentality that ultimately believes policy will provide a backstop," said Vincent Deluard, global macro strategist at StoneX Financial. "Every time, every cycle, this mentality becomes self-reinforcing. Thus, this 'policy umbrella' gets reset at higher levels."

Past monetary easing cycles clearly demonstrate this imbalance: employment weakness darkens worker prospects while falling rates provide cushions for those with capital to deploy. In the process, wealth gaps widen – a trend accelerated by post-pandemic stock market bulls. This gap is most evident in shareholdings. Fed data shows that while the share of US households owning stocks has reached records, the bottom 50% control only $500 billion compared to the $23 trillion held by the top 1%.

"The returns investors are getting make them ignore geopolitical risks, ignore all economic risks," Atwater said. "Those at the pyramid's peak have no sense of the growing desperation at the bottom."