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Cascading tech values are leaving a lot of investors feeling queasy. Michelle Jorgenson, who trains social workers in Chicago, halted plans to buy a cabin hideaway when the value of her mutual funds sank $9,000 in October. Pamela Green, a dotcom marketing executive in Atlanta, saw her down-payment kitty sink from $10,000 to $7,500, and instantly put the brakes on a condo deal. "I have a lot of expenses, and I'm not hearing anything from clients," she says. "I'm going to hold off on spending. My mother always taught me to have some money that I call my God-forbid money, and I've already had to dip into it."
In nearby Smyrna, Ga., Greg Jackson, a gas-station owner, puts it succinctly. "I've lost my tail," he groans. "I gambled and lost with tech stocks." After holding only blue chips for a decade, he jumped into Internet stocks a year ago, near the peak of dotcom mania. Now he's investing in land and his business--and spending less.
Such anecdotes help fill out the market backdrop. Since March, $2 trillion of market value has been wiped out, and if you believed in a wealth effect on the way up, then you have to believe in it on the way down. People spend less when their savings evaporate. They spend less when it will cost 30% more to heat their home. No wonder retailers are anxious about Christmas. Beyond that, the possibility of a recession next year has crept into the stock market. That's going to make sustainable gains hard to come by. Like Harry Potter and his magic mirror, you can see what you want. Just remember that what you see may not be real.
--With reporting by Matt Baron/Chicago and Collette McKenna/Atlanta