While investors may have been encouraged by the more than $20 drop in oil prices since 3 July, indications are that the American public as a whole is not coping too well with mounting economic pressures. This is evident by the fact that an increasing number of individuals are dipping into their savings and retirement funds to meet their monthly expenses, including mortgage payments, and this in turn is having a negative impact on the financial sector of the stock market.

Many so-called “baby boomers” – people born between 1946 and 1964 during the economic expansion following World War II – are withdrawing funds from their defined-contribution retirement plans, despite the fact that there are penalties incurred for early withdrawal. This growing trend is a major cause for concern among money managers who are desperate for a sustainable stock market recovery during the last six months of the year. A recent survey conducted by the American Association of Retired Persons (AARP) revealed that, of the more than 1,000 respondents between the ages of 45 and 64, almost 25 percent have made withdrawals from their retirement plans, as well as other investments. Another growing trend among individuals who are not withdrawing funds, is that of reducing the size of monthly amounts paid into defined-contribution retirement plans.

Investment management company, the Vanguard Group, confirms that they have seen a 22 percent increase between December 2006 and December 2007 in what they term “hardship withdrawals”. The problem of not being able to meet debt obligations has been compounded by the fact that when home values rose dramatically in the not too distant past, homeowners accessed funds through their mortgages for frivolous reasons, and are now paying the price.

The far-reaching consequences of the credit and housing crisis are reflected in the fact that, on a nationwide basis, more that 8,000 properties are subject to foreclosure each day. In an economy where a house generally represents an individual’s biggest asset, this high volume of foreclosures puts the average American’s financial status into gloomy perspective.

American Express recently revealed that its wealthiest cardholders – known as “Superprime Cardmembers” – are spending less on discretionary/non-essential purchases. This is seen as a clear indication that, while maybe not in danger of losing their homes, even the more affluent in the country are feeling the pinch.