What will tomorrow bring?
No one ever knows for sure, especially given the developments this year. That’s why investors are becoming ever more eager to read about the future insights of economists and fund managers.
And while any forecasts can be fraught with risk, writing effective investment outlooks needn’t be if you follow some basic guidelines.
Although some historical context may be necessary, the key emphasis should generally be on the future, not the past.
The market plunge in March has inevitably drawn comparisons with previous events, notably the subprime crash and the Great Depression. However, both these previous crises have been very well-documented in the years since – so a lengthy dissection of these events may not be the best use of time and space in economic outlooks.
Though Morgan Stanley did raise the spectre of 2008 in a recent piece looking at conditions today, it only did so to highlight brief and specific parallels. Most of the article focused clearly on the months ahead.
If you’re writing an outlook focused on a particular event, make sure you’re quick off the mark. This way you are likely to get a lot of attention from your readers – and possibly from the media too – as the development will be fresh in their minds. This is especially important in fast-moving market conditions.
For example, several asset managers had pieces analysing the impact of the Federal Reserve’s surprise rate cut in March just after it happened. Indeed, PIMCO’s was published on the same day.
Preparing beforehand can help you to be quick on the uptake. One way is to use scenario analysis to map out different versions of your outlook based on what the different outcomes are likely to be. Then on the big day, you’ll hopefully just need to make a few tweaks before publication. Furthermore, these “alternate-reality” texts don’t have to go to waste; you can use them to add meat to longer detailed pieces
No matter how well you prepare, you cannot plan for everything, especially when the unexpected happens, as this year has clearly shown. Economist John Kenneth Galbraith once said, “We have two classes of forecasters: Those who don’t know — and those who don’t know they don’t know”. So it’s perfectly ok if an outlook doesn’t chart a perfect vision of tomorrow!
Abrdn made no bones about this in a recent article discussing the prospects for US corporate profits, which summed up by stating that “the way ahead is decidedly foggy”. A willingness to eat humble pie, when warranted, can do wonders for your credibility.
Pay attention to the nuts and bolts
Another important aspect of credibility involves ensuring your outlook doesn’t sound like mere guesswork. This means backing up statements with solid foundations such as facts and figures or expert opinions. Logic is key too – evidence doesn’t just mean quoting experts and stuffing your outlook with charts and tables. Outlining the steps you took in reaching a particular conclusion and why you believe it is justified is important, especially in cases where you may not have statistics at your fingertips. For example, rather than just saying “We believe the coronavirus could benefit technology stocks” delve into why and how this could occur. One effective example of such an approach is Janus Henderson’s recent piece on these lines.
While citing evidence is important, do remember your readers want to know what you or your organisation think. So don’t just regurgitate the World Bank’s or Bank of England’s outlooks – focus on conveying your views or those of your colleagues. When citing external growth or inflation forecasts, do try and add insight by saying what you think about those figures.
Over May, the coronavirus spread in Brazil aggressively, and the government’s lack of action prompted dire warnings in the financial press about the economic impact. But that didn’t deter Schroders from publishing a piece on positive catalysts ahead for Brazilian equities. Bold predictions could be the key to making your outlook different from the herd.
However, it’s also important to ensure such articles don’t come across as uninformed opinion pieces, so be sure to back up your points with solid evidence as Schroders did. Also, remember to respect your readers’ sentiments by eschewing overly emotive language. For example, the recent developments around Hong Kong are highly sensitive to a vast majority of people and businesses on both sides.
At the best of times, financial jargon is befuddling. And this is certainly not the best of times, as we’ve been forced to get to grips with a storm of Covid-related lingo – social distancing, R-number, second peak, flattening the curve, to name just four. Against this backdrop, financial jargon may be causing more unease than ever. Indeed, findings from a survey late last year suggested that asset managers’ websites are harder to digest than Moby-Dick, among other things. Not only does jargon confuse, but it also creates mistrust.
Sometimes, of course, technical terminology is unavoidable – there are few other terms that capture “liquidity” with such precision. But if you are going to throw in these terms, it’s good practice to define them. This is what Fidelity did in an article about how recovery from the current crisis might play out – the now-famous “V-shaped recovery” was mentioned, but the piece went on to define what this meant, and also explained the other likely shapes. Concise language can help the financial industry connect better with the target market, especially when it comes to retail investors.
An outlook can be a simple sentence along the lines of “we expect equities to fluctuate”. But it can do so much more when time and space permit. For example: “We expect equities to fluctuate; this should present buying opportunities for the fund manager. Moreover, our fund is likely to be better positioned for such a scenario than its peer group as it has a relatively stronger focus on high dividend-yielding stocks”. In just a couple of sentences, you not only outline the fund manager’s take on future market developments but also form a link to the fund’s strategy and current positioning.
A well-constructed piece can be a chance to show how the fund manager stands out from his or her competitors. So rather than just treating outlooks as a box-ticking exercise, try a thought leadership angle – some tips on how to do this here – as this could be a powerful way of building up an audience, some of whom may even turn into clients.
