Consumers are feeling the impact of higher Social Security taxes and rising gas prices, and so are the nation’s retailers.
Nearly all workers are taking home less pay. A temporary 2 percentage point cut in the Social Security tax, from 6.2 percent to 4.2 percent, expired in December. It had been in place for two years.
Someone earning $50,000 is now pocketing $1,000 less in take-home pay. The average price of gas was $3.78 a gallon Thursday, an increase of 47 cents a gallon in just the past month.
Wal-Mart Stores, the nation’s largest retailer, is among several companies including Burger King, Target and Zale, that have warned that shoppers are feeling squeezed. Although Wal-Mart’s business has been volatile in recent weeks, management says it’s unclear how the Social Security tax will affect spending habits long term.
Cautious investors may want to consider a mutual fund that focuses on companies that supply consumer staples – goods that are in consistent demand even when the economy is slow, like food and household products.
Specialized funds should be limited to a small percentage of your portfolio, say 5 percent. One reason is that diversified funds are likely to own stocks in the same industry and you don’t want to skew your investments too heavily toward one segment of the market.Associated Press