Happened yet? Starting
It stands to reason that when people stop buying stuff, the stock market - populated with companies that sell stuff - heads south. All the major dips in consumer spending over the past 30-plus years have taken place as stocks were just beginning to slide or during prolonged declines.
The tricky part: Measurable drops in consumer spending often occur after the market has already started falling - making it a less than perfect indicator.
It's still important to watch, though, because experts say that slumping consumer spending could help turn what otherwise might have been a mere correction into a true bear.
So far this decade, consumers have been spending away happily - until recently. Retail sales fell 0.9% in June, bad news for companies like Home Depot, Macy's and Sears. And if housing prices continue to drop in many parts of the country, consumers will clutch their pocketbooks still tighter.
Brian Stine, an investment strategist with Allegiant Asset Management Co., a firm that oversees about $30 billion in assets, says, "It could dramatically curb spending and even employment growth." Neither would be good.