War-driven stock losses could shave $1.5 trillion from US household wealth this quarter, research firm says

• Falling stocks may erase $1.5 trillion in wealth this quarter, impacting consumer spending.
• That's according to Pantheon Macroeconomics, which sees a $50 billion spending drop associated with stock volatility.
• Discretionary spending could be most affected, hurting the recreation, hotels, and food industries.

Consumers have had plenty to grapple with recently — the threat of AI displacing jobs, sticky inflation, and the impact of the US-Iran war on gas prices. Household balance sheets have another foe this quarter: the stock market.

Economists have flagged the "wealth effect" in recent years to explain how rising stock prices and the emotional impact of watching wealth grow on paper can make Americans feel more upbeat and willing to spend.

Well, the wealth effect cuts both ways.

Falling stock prices since the start of 2026 could put pressure on consumers as they see their net worth dwindle, causing them to pull back on spending.

Economic research firm Pantheon Macroeconomics predicted this week that falling stock prices could erase $1.5 trillion in household wealth in the first quarter of 2026, the worst decline since the depths of the 2022 inflation-driven bear market. In a note to clients on Tuesday, the firm said this would cause a $50 billion decline in spending.

Federal Reserve research from 2025 shows that consumer spending jumps by $0.035 for every dollar increase in Americans' wealth. But Pantheon said the impact of stock moves could be higher now, as more people are paying attention to the stock market than in the past.

"Google Trends data show online searches for 'stock market' in April 2025—when the 'Liberation Day' tariffs were announced— were over two times higher than in May 2022, when markets were rattled by soaring inflation and interest rates, even though the fall in stock prices was of a similar size," Samuel Tombs, Pantheon's chief US economist, wrote in the note. "So, the Q1 drop in wealth might have a slightly bigger impact on spending than research based on decades of data suggests."

Tombs said a few industries sensitive to discretionary spending should take an outsize hit to earnings: recreation services, hotels, and food.

Here's a chart of the expected impact on recreation spending — think flights, golf, movies, and concerts.

"All told, it would be astonishing if discretionary services spending held firm over the next couple months, given the squeeze on households' cashflow from higher gasoline prices, the negative 'wealth effect' now in play and the deterioration in consumers' confidence now strikingly visible in Morning Consult's daily data," Tombs wrote.

"Accordingly, we continue to expect growth in consumers' spending to slow this year, even though larger-than-usual tax refunds are supporting households for now," he added.

Eventually, a pullback in spending could feed back into stock performance as corporate earnings lag. Tombs said the hit to growth that the current spending crunch will cause should move investors' interest-rate expectations lower.

"A growth scare in Q2 looks likely," he wrote.