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 1. Individuals
 2. Build Your Knowledge
 3. October economic outlook: Why base hits matter in baseball and the economy




OCTOBER ECONOMIC OUTLOOK: WHY BASE HITS MATTER IN BASEBALL AND THE ECONOMY


QUICK TAKEAWAYS

 * Some companies grab headlines for wild stock market gyrations. But they’re
   not really representative of the consistent progress that businesses both big
   and small try to achieve every day, year after year. So if you think one
   company predicts good or bad for the economy, you may want to reconsider.
 * The Federal Reserve continues to try to tame inflation. But it takes time,
   and there may be some economic effects, such as higher unemployment, with
   interest rate increases. Although history has some clues as to what the near
   future looks like, the exact mix of economic factors at play in 2022 means
   that the reality remains anyone’s guess.

In some ways, October can feel like an in-between month. The rush of summer
subsides, back-to-school routines settle in for many, and the high-octane energy
of the holidays hasn’t yet kicked in.

Unless, of course, you’re a baseball fan. Then, October marks a sprint of a
different sort, especially for teams trying to cobble together enough wins to
make it to the playoff finish line.

Sports continue to provide some interesting analogies for evaluating the 2022
economy. A lot of baseball teams are stuck not knowing what the future holds.
And a lot of us are stuck not knowing exactly where the economy is headed.
Several baseball teams will make a frantic dash to win as many games as they
can, and many companies—after the mid-October release of third quarter data—may
have to make a similar dash to adjust before year’s end.

Where will it all end up? It’s worth remembering that the fundamentals—to
baseball, to the economy, to your financial situation—matter quite a lot.


WHAT WE CAN LEARN FROM BASEBALL (AND THE MOVIES)

Have you ever heard of sabermetrics? Maybe not. How about the movie Moneyball?

The latter, of course, was an acclaimed (albeit loose) adaptation of a book,
Moneyball: The Art of Winning an Unfair Game, that described the seemingly
improbable run of the 2002 Oakland A’s. Lacking big stars and an expansive
budget, the team made it to the first round of the playoffs not because of
emotion-jolting home runs but because of sabermetrics.

The premise of sabermetrics is that one star player who hits a lot of home runs
isn’t enough to push you to the top of the baseball heap. For that you need a
team that gets on base all the time, even if none of the players is a regular
home-run hitter. “For followers of sabermetrics, it doesn’t matter how you
score, it matters that you score—slow, steady, fundamentally,” says Heather
Winston, director of individual solutions at Principal®.

Sabermetrics equates to the economy like this: It’s not the one-day run (or
fall) of the stock market or the flashy company with the meteoric stock rise—the
equivalent of a home run—that represents its health. Meme stocks matter less
than the collection of companies ensuring their balance sheets stay in the black
while they service customer wants and needs. Declining jobless claims and
blue-chip stocks are the equivalent of getting on base, every time, every year.

“Are there outliers to those stable, growing companies that have normal ups and
downs? Of course,” Winston says. “But to have long-term success, it’s about
consistency, time, and the benefit of time—getting on base.”

--------------------------------------------------------------------------------

Are there outliers to those stable, growing companies that have normal ups and
downs? Of course. But to have long-term success, it’s about consistency, time,
and the benefit of time—getting on base.”

—Heather Winston, director of individual solutions at Principal

--------------------------------------------------------------------------------

Unfortunately, October, like so many months this year, continues to generate a
lot of mixed data—some pitches are home runs and some are strikes. Inflation
remains stubborn, but lots of people are working and corporate profits continue
to remain strong for many.1 When you’re looking for a clear message, this
complicated data doesn’t help.

“As a public, we can be super swayed by the outrageous or the brash,” Winston
says. “But it is rarely one lone data point that tells the story. We have to
teach ourselves to look at numerous components, synthesize them, and then come
up with conclusions. We cannot quickly interpret everything as a singular fact.”

Your wallet: Your retirement accounts’ progress has likely presented its own
mixed messages based on your goals and asset allocation (mix of investments).
But changing your long-term strategy as a response to a short-term headline may
derail progress. “When it comes to financial security, some people may think
there’s a faster way and swing for the fences, but that may be risk that’s
unnecessary,” Winston says. Time in the market, not timing the market, remains
true, even when there’s market volatility.


WHY THE MULTIPLIER EFFECT MATTERS

The idea of sabermetrics—getting on base over and over—matters quite a lot in
the context of September’s big news-getter, the Federal Reserve’s decision to
raise interest rates.

It’s the second large jump of the year, and rate increases are the biggest bat
that the Fed has to try to beat back the inflation that continues to cause a lot
of pocketbook distress. Just like the last time, the Fed’s move garnered lots of
news headlines and varying rushes to judgment by pundits. But unless you’re in
the market for a home mortgage or a car loan, or have a variable interest loan,
that news probably didn’t cause you to do anything different.

“It’s good to stay up on economic news, but it’s also good to have a filter and
understand, strategically, when you can ignore some things,” Winston says. “It’s
like interjecting a pause in your thinking. Monetary policy, what the Fed is
responsible for, doesn’t impact all of us in the same ways.”

The Fed’s decision wasn’t surprising; the board has been transparent about their
focus—bringing inflation down. If you have those big-ticket, interest-dependent
decisions on the horizon, you may need to adjust based on your financial goals.
Taming inflation will take time, and we’re all impatient for the end positive
result.

Your wallet: What’s your getting-on-base strategy—the thing you do for your
financial security, over and over? “Those little actions have a multiplier
effect over time,” Winston says. For example, consistently increasing your
retirement savings—say, when you get a raise, or a percentage point every
year—adds up dramatically. And it’s a retirement savings strategy that people
use, over and over—because it works.




WHAT'S NEXT?

 * Are you getting enough base hits for your retirement savings? Short-term
   changes can bolster your long-term retirement plan. Log in to your Principal
   account to set up yearly auto-increases or check in on your contribution
   rate. Don’t have an employer-sponsored retirement account? We can help you
   set up your own retirement savings.

1 Trading Economics

The views and opinions expressed are for informational and educational purposes
only as of the date noted and should not be considered investment advice. No
forecast based on the opinions expressed can be guaranteed and may be subject to
change without notice. No investment strategy, such as diversification, can
guarantee profit or protect against loss.

Investment advisory products offered through Principal Advised Services, LLC.
Principal Advised Services is a member of the Principal Financial Group®, Des
Moines, IA 50392.

Insurance products and plan administrative services provided through Principal
Life Insurance Company®, Securities offered through Principal Securities,
Inc., member SIPC and/or independent broker-dealers. Investment advisory
products offered through Principal Advised Services, LLC.

© 2022 Principal Financial Services, Inc.

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