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Of course, America's households will not stop spending money altogether, nor will they forget about Christmas, ignore charities and hoard gold. But the market's acrobatics left many people feeling a bit breathless and more than a bit scared. "Who knows what's ahead or how it may affect us?" asked Ed Robert, 53, a commercial-property manager in Houston. "All that fear in the air may trigger a recession and come back to haunt us."
Some families have become leery of going ahead with major expenditures, for fear they might one day need their cash to sustain them through difficult economic times. Auto dealers are already resigned to some falloff in demand until consumer nervousness subsides. Barbara and Jeffrey Colton of East Williston, N.Y., were planning to overhaul their leaky bathroom. But they did not get around to selling the stock they were going to use to pay for the renovation. When the market plunged, the plans were shelved. "Now we're probably going to do a patch job," says Barbara, a substitute teacher. She thinks she may accept some extra assignments that a few weeks ago she would have turned down. "It might not be a bad idea to make some extra money. Maybe I can pay for the bathroom without waiting out the market."
Housing could suffer from falling confidence. In an uncertain environment, young families may be reluctant to build a new home or take on a mortgage. Lower demand, in turn, could drive prices down. One New York City apartment hunter was having second thoughts last week about buying a condominium. "But the seller slashed the price, and we closed the deal," says a broker who represented the buyer. "The market crash saved my client $25,000."
Other sales were sidetracked. Real estate agents reported that some buyers were pulling out of deals at the last minute because the stock they had planned to sell in order to finance the down payment was suddenly worth less. Stan Smith, who sells corrugated containers out of La Grange, Ga., invested his entire $12,000 in savings in the market four months ago to earn enough to buy a house. "It was all so new to me," he says. "I'm the first kid in my family to go to college. I read the Wall Street Journal. And I had really become money conscious. I would say to my girlfriend, 'If we don't go out to dinner, I can buy another share of stock.' " When the market crashed, he found that what was intended as a short-term investment may tie up his money for years. Still, Smith considers himself a little luckier than some other Georgians. Says he: "One of my friends pumped everything he had into the market. He has three kids and one on the way. He sold Monday at a loss. I guess the stock market wasn't the thing to invest in."
Over the next few months, the private decisions of individuals may have a cumulative public effect. Consumer spending accounts for two-thirds of America's gross national product. A significant falloff might prompt retailers to withhold orders and not restock their shelves until demand recovers. Businesses might be forced to cut spending and lay off workers to protect profits. Rising unemployment could slash the income of many households, further depressing retail sales.