Do you think consumer spending is going to slow now that the stock market is showing heavy declines?

Question

The US stock market is already showing heavy declines this morning. Do you think it is going to cause everybody to dig into the ground and wait it out?

Answer 1

yes lenders will hedge there bets credit will get tight firms will cut back unemployment will rise and many will find themselves in negative equity it,s all happened before,batten down the hatches

Answer 2

There has been some recovery since a couple of days ago - do not panic - the Bulls are busy buying right now. The problem is not so much the stock markets but the down-turn in the US economy. Yesterday the US GDP was marked down to 2.2% [approx] from 3.5% - a marked difference. Also in US, house prices are already tumbling. Add to this the fact that the world debt bubble is about to burst, the cracks are showing, seriously now.

The best advice is not to invest any more than you can reasonably afford to lose. Stocks and Shares are another form of 'gambling' - nothing wrong with that you understand, but there are risks. Often the risk is worth taking and if you've plenty of capital you can 'risk' buying shares that have fallen in price and maybe take advantage of whatever profit shows in the next couple of days then sell.

Frankly, I got out of buying shares about 15 years ago. People only need to understand the risk involved, that's all. The worst that can happen is a slap for being foolish. Never over buy. Only buy what you can afford to say goodbye to forever, if it comes to it.

As for consumer spending, this may already be in decline here in UK following the January sales when many went mad and probably over spent on their credit cards - adding yet more debt to their already big overspend in that area.

Do this now: take out all your credit cards and cut them up into tiny little pieces and throw them away. No more credit spending. Live on what you earn.

Income = $200
Expenditure = $210 = unhappiness.

Income = $200
Expenditure = $190 = happiness.

Never borrow more money to pay off existing debt.

Beware of sharks! Good Luck.

Answer 3

Another way to look at this is here:
Did the sharp increases in the stock market over the past few months cause consumer spending to increase? The answer to this question is no.
So a sharp decline is unlikely to cause them to decrease their spending.
However, spending may decline over the next few months due to other factors. These factors are things such as the general slowing of the economy, which causes individuals to worry about unemployment. When one is concerned that he may not have a job in a few months, he tends to spend less of his money now.
Another concern is the decline in home values. Many individuals leveraged their houses to the hilt to increase their consumption. Now that prices are not rising anymore, these individuals can no longer tap this equity to spend. Thus, they will be forced to curb spending that had been funded from this source.

So, the factors that are causing the stock market to decline are the same factors that will cause individuals to curb their spending, but their spending is not being curbed just because the stock market is declining.

Answer 4

Probably not, unless that spending is financed by anticipated future gains in the stock markets.

You may see some decrease in spending in the business sector, as well as in the financial sector (why buy a share of stock today when it may be 5% cheaper next month?), but market declines of 4% aren't sufficient to prevent someone from buying tomato soup and cheese.

A market decline of 40% would be a different story, but mostly shock value as opposed to portfolio management effects.