Stock market’s deep sell-off puts 401(k) investors on edge

Susan Tompor | Detroit Free Press | May 20, 2022

How long will consumers keep spending?

“I had almost no concerned client phone calls until up to two days ago,” said Sam Huszczo, a chartered financial analyst in Southfield, told me in an interview Friday morning.

Many investors, he said, seemed to shake off some of the earlier declines when the Dow regained some ground last week.

But this week’s market sell-off became harder to ignore. Many investors are increasingly nervous about the risks of a recession and further declines in stock prices.

“The stock market’s reaction has been somewhat surprising,” Huszczo said, “as the economic data does not match the fear trading that is happening today.”

Much of the economic data, he said, remains quite strong — retail sales grew 0.9% to a record $677.7 billion in April, consumers are sitting on $2 trillion in savings, manufacturing is strong, and the U.S. unemployment rate remains exceptionally low at 3.6% in April.

Huszczo falls into the camp that says the consumer remains in good shape and is able to keep spending.

“The fact that the American consumer hasn’t slowed down yet, puts a backdrop on how bad this market could get from here,” Huszczo said.

“I don’t see anybody cutting their lifestyles out of fears of an economic recession.”

While things can even  out a bit in the days ahead, according to some analysts, the ride could continue to be volatile in the summer, too.

Companies that sell discretionary goods to consumers — and let’s face it, a lot of what we put in those carts at Target and Walmart is stuff we really don’t need — have far less certainty when it comes to sales outlooks if consumers start dwelling on every dollar they’re spending now that inflation is so high.