????Consumers are switching from 'conspicuous' to 'conscious' consumption, according to investment strategist Edward Kerschner.

????By Telis Demos

????Signs that we're reaching an economic bottom are beginning to emerge: a 28% jump in the S&P 500 index since its March low, a sustained rise in oil prices, and the Fed's latest Beige Book noting "a moderation in the pace of decline." But the key question for how good things will get is: What will the American consumer do?

????Personal consumption still accounts for about 70% of gross domestic product, according to the Bureau of Economic Analysis. And so far, the signs from consumers aren't nearly so positive. Consumer spending is rising slightly, but without a quicker recovery, forecasters worry that the global slump will last much longer. A survey by restructuring firm Alix Partners estimates that if spending stabilizes at current levels, it could cost the economy nearly $1 trillion over the next two years.

????So what exactly are consumers thinking right now? Spend more? Spend less? Or just spend differently? Citigroup Global Wealth Management recently completed a study of consumer behavior trends. Fortune talked to its author - chief investment strategist for Global Wealth Management and adjunct New York University business professor Edward M. Kerschner - about thriftiness, the do-it-yourself economy, and crystal Mr. Potato Heads.

????Do you think we'll see consumers behave more frugally for a long time?

????I think we're in a behavior inflection point. We're going to see thrifty times for quite some time, not just a cyclical retrenchment. But consumers aren't being frugal - they're being thrifty. Through surveys, we've learned that consumers don't always react positively to price cuts.

????There are assumptions that consumers make when a brand lowers its price. 61% of consumers think the price will just change again soon. 60% think it will go down further. Instead, it will be the companies that offer the perception of value - as opposed to just putting things on sale - that will be the ones that benefit.

????What do you think explains this shift?

????It's partly because of the economy, but also it's something philosophical. We're seeing a shift from "conspicuous consumption" to "conscious consumption." The definition of affluence changes over time. Think of ancient times - wealth was measured in something like slaves and women.

????In the last few decades, we have become the experiential generation. People crave unique experiences, not necessarily just products. Think of people lining up when [Neiman Marcus] sold Swarovski crystal-encrusted Mr. Potato Heads, or baby boomers buying trips down the Amazon river in native canoes.

????People want a sense of identity and community. Sports clubs will become popular. For every 1% increase in unemployment, we've found, there's a half-point reduction in inactivity.

????So what kind of consumer behavior do you expect to see?

????Consumers will plan purchases more carefully. 70% say they won't delay if it will save them money in the long run, like socially or environmentally conscious products. We're seeing no reduction in the purchase of environmentally-friendly products.

????10% of consumers are spending less on green products, but 35% are spending more. 65% of consumers say they are spending more on products that they know will benefit a good cause.

????It's not about price. It's about the whole value proposition. And that result is true for consumers who say they have a lot economic anxiety, too.

????Will more consumers go for "do-it-yourself" services, like auto repair or stock trading, rather than paying someone else to do it?

????I'm not sure if do-it-yourself gets boosted. We saw that if consumers feel like they're getting value from a professional, they're more likely to go to them. If you think about online trading, a lot of day traders aren't happy with their results. They're thinking right now that prudent and professional asset allocation saves you more for the price.

????The only thing that will continue to do well will be do-it-yourself projects that are sold as experiences - like building your own classic car - rather than just a way to save money.

????What about discount retailers like McDonald's or Wal-mart? They're doing very well.

????Those are not "discount" retailers really. The "value meal" is a perception of quality and value, which is a lot of what's driving fast food sales, not just a desire to spend less. There is also growth overseas driving those companies. In Asia, we're seeing a huge increase in the middle-class population, a huge increase in spending, and a tendency to trade up and buy better brands. That trend won't be stopped by this recession.

????Do you think that this savings trend will have implications for the market?

????Yes. Look at what happened in Japan in the late '90s. Assets invested in the stock market fell to just 7%, from a peak of 23% in the late '80s. Assets in insurance plans and pension reserves, by contrast, went from 18% to 27%.

????The idea again is a focus on thriftiness, on long-term value and savings. People are not going to be talking about 20% returns from the hottest IPO or hedge fund. They're going to be considering the value proposition of their investments, too. And that could mean a lot fewer investors returning to the stock market any time soon.