With the first three months of 2025 behind us, quarterly statements for 401(k)s, IRAs and other investment accounts will be arriving soon in mailboxes and inboxes across the country. They’ll be full of minus signs, showing how much investors have lost recently.

Now, we often talk about a “wealth effect” — basically, when the value of assets like stocks and homes goes up, folks feel richer, at least on paper, and they spend more because of it.

So, what about the opposite? Is there a negative wealth effect when people lose money on paper?

Things were going really well for the stock market, until they weren’t, said Rob Haworth, a senior investment strategist and senior vice president at U.S. Bank Asset Management.

“In the end of February, we had the S&P 500 touching new all-time highs, and we finished the quarter in negative territory for the year so far,” he said. The S&P 500 is down 4.5% and the Nasdaq is down 10%, as of March 31.

Kathy Bostjancic, chief economist at Nationwide, said there’ll be a psychological impact.

“When you see this sharp decline in equity prices, that’s the negative wealth effect. Consumers start to pull back,” she said.

But here’s the thing. For a lot of Americans, the majority of their wealth is in their homes.

“Latest data continue to show appreciation in home prices. So that — in terms of, like, a wealth effect — is still intact,” Bostjancic said.

And as for stocks, history shows that a sharp decline, followed by a quick rebound — like we’ve seen recently — doesn’t usually lead to a prolonged downturn, said Sam Stovall, chief investment strategist at CFRA Research.

But, he said, most small investors probably don’t know that. 

“They’re the ones that are most likely to allow their emotions to become their portfolio’s worst enemy,” he said.

One group that’s especially nervous right now: people 55 and up, who are seeing their retirement accounts decline in the midst of rising economic uncertainty, said Olivia Mitchell, a professor at the Wharton School.

“A lot of financial advisers advocate: Just ride the bumps, you’ll be all right in the long run,” she said.

Mitchell, over 70, is not really listening. “I myself got basically completely out of U.S. equities about two weeks ago,” she said.

As for whether recent losses on stocks will translate into less spending on stuff, Rob Haworth at U.S. Bank said declines of this magnitude don’t always squelch retail sales. 

“The biggest driver we see for consumer spending is really, do people have jobs? And are their incomes growing?” he said.

Bigger, he said, than any potential negative wealth effect from a falling stock market.