Image of a winding road.

October economic outlook: One number can’t tell you everything

Quick takeaways

  • Point-in-time numbers reflect just that—a point in time. A short-term dip or peak may not indicate a long-term trajectory. Give any new data some time before it influences your decisions.
  • Resiliency and flexibility are hard. We’re all craving a breather. Take stock in the last quarter of the year and, if you can, celebrate your successes both big and small.

Find yourself feeling optimistic about one day’s news cycle and gloomy the next? You’re not alone. It’s been a roller coaster economy over the last 18 months.

Take job security confidence: It’s a measure of how safe people feel in their own employment. It’s been slowly ticking back up,1 and yet more than 8 million people are unemployed and looking for work.

That Jekyll-Hyde news contrast is jarring. “Does everything feel good?” says Heather Winston, assistant director of financial advice and planning at Principal®. “No. Have we been in worse places than we are today? Yes. But if a lot of things are fine, how do we navigate when everything feels confusing?”

Let’s look at a few numbers to figure out what may be ahead, at least in the short term, and what you can do to possibly roller coaster-proof your finances (and perhaps your outlook, too).

If a lot of things are fine, how do we navigate when everything feels confusing?”

Heather Winston, assistant director of financial advice and planning

Connections and comparisons matter.

If you feel that things are moving in the right direction, that you’re able to pay your bills (and then some), and your job is stable, you’re probably OK going out to eat, booking a vacation, or buying stuff that isn’t strictly a necessity. That, in turn, enables restaurants, stores, and service companies to maintain or boost their workforces. Which then enables those employees to pay their bills and buy their own extra stuff.

We watched that happen in real time this summer. COVID-19 cases dropped. People got vaccinated and gathered for long-delayed weddings and barbecues and parties. Spending and hiring ratcheted up.

And then life got bumpy again. Cases jumped. Those sunny headlines have, in some cases, turned gloomy. But, in general, things aren’t as bad as they were a year ago, and we don’t know what will happen next.

Which is why comparisons matter.

Think of those news headlines or single data points like a fast-fashion trend: Here today, maybe gone tomorrow (or next week). “General consumer data tells us how people are spending,” Winston says. “But you have to put those numbers into context.”

There’s consumer spending as one data point. Even though people pulled back at the end of summer, spending in some categories grew up to 30%, and in some cases exceeded pre-pandemic levels.2

Your wallet: A single number can’t tell you everything you need to know about the economy. But a single personal finance number—your credit score—can help you get a better interest rate on big purchases. (Learn about reading a credit score and why it matters.) When’s the last time you checked yours? Request a free copy each year to stay alert to any unpaid charges or identity theft issues (you can get one from freescoreonline.com).

The stock market is pretty … weird right now.

The Dow Jones and S&P have both been setting records in 2021, with overall trajectories that, for the most part, keep going up.3

Is it the calm before the storm? History says, maybe.

“It feels like it’s overdue, and there are a lot of undercurrents in the data that might indicate the end of a bull market run,” Winston says. (Read about the difference between a bull and bear market.)

The challenge for you, as an individual investor, is unwarranted exuberance (or pessimism) which leads to quick decisions that may be costly in the long term. “If they are looking at that day-to-day stock market movement and making quick decisions, it’s possible their timing isn’t great,” Winston says.

Your wallet: One way to get ahead of whatever headwinds might be blowing is to consider regularly rebalancing your accounts. You’re typically able to do that at any time. (Learn about asset allocation.)

The supply chain will keep sticking. You’ll keep adapting.

Generally when we talk about supply chains, we’re talking about goods—those scarce semi-conductors that have slowed vehicle assembly lines, for example. But we’re in a strange time when supply chain pressures aren’t just about goods, but also about people. There are workforce shortages everywhere.

The supply chain stickiness isn’t likely to resolve itself anytime soon, especially as different parts of the globe experience different points in their pandemic recovery. Clothing retailers, for example, are pulling forward deliveries to help accommodate holiday sales.4 Restaurants are trimming hours until they can staff up. If you’re like many Americans, you may have boosted toilet paper supplies and savings.5

There’s uncertainty, but all we really want is, well, certainty. “We’re all antsy. We want to be done with this and turn the page. It’s taken a big psychological toll,” Winston says.

Complacency may be tempting, but it’s not the answer says Winston. “Regroup. Look back at what you’ve accomplished and look ahead at the challenges and focus on what you can do next,” she says.

We’re all antsy. We want to be done with this and turn the page. It’s taken a big psychological toll.”

Heather Winston

Your wallet: If you’ve put off a big purchase like a home because costs were too uncertain, what can you tackle in the next six months to get to a more secure financial place? (Read about creating a home-buying budget.) For example, paying down small debts may free up more money for long-term goal savings.

What's next?

1 https://www.forbes.com/advisor/personal-finance/consumer-confidence-stable-income/

2 https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/survey-us-consumer-sentiment-during-the-coronavirus-crisis

3 https://www.wsj.com/articles/record-stock-rally-ignores-wall-streets-phobia-about-optimism-11626600781?mod=article_inline, https://www.wsj.com/articles/u-s-stock-market-faces-potentially-bumpy-autumn-wall-street-analysts-warn-11631439002

4 https://www.supplychaindive.com/news/retailers-shift-tactics-suppliers-Vietnam-lockdowns/606363/

5 https://www.cnbc.com/2021/08/17/post-covid-revenge-spending-is-costing-americans-765-more-a-month.html

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