What will tomorrow bring?
No one ever knows for sure – but that doesn’t stop investors poring over the words of economists and fund managers in search of insights into the future.
And while any forecasts can be fraught with risk, writing effective investment outlooks needn’t be if you follow some basic guidelines.
Look forward, not backward
Although some context may be necessary, your key emphasis should generally be on the future, not the past.
On the morning after Brexit, sterling’s crash dominated the media – so a lengthy dissection of its fall and numerous historical comparisons may not have been the best use of an outlook’s time and space. Instead of looking backwards, focus on providing insight into what you think will happen next.
Schroders did this well in a recent piece on how tighter monetary policy conditions could affect emerging markets – only two lines were spent on 2013’s “taper tantrum”; the rest of the article looked to the future. As well as highlighting that a sell-off in the style of 2013’s was unlikely, the piece also talked about which bonds offered the best risk-return prospects and the fund manager’s favoured areas.
Timing can be crucial
If you’re writing an outlook focused on a particular event, do 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. To take a recent example, several asset managers had pieces analysing the impact of a hung parliament on their websites on the very day of the UK election results.
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 waste; you can use them to add meat to longer detailed pieces. For example, for a piece to be published the day after a speech on monetary policy by Janet Yellen, you could work on two versions beforehand – one assuming her comments sound hawkish and one assuming the opposite.
After the event, you could file away the unused piece for later use, perhaps in an article about “how markets are likely to react to speeches from Fed officials”.
Navigating around black swans
No matter how well you prepare, you cannot plan for everything, especially when the unexpected happens. For example, if you were writing an outlook about the US retail sector and wanted to get this live on 19 June, the announcement of the Amazon-Whole Foods deal that day would likely have rendered much of it irrelevant. In this case, you could provide a short reaction to the new development and follow up with a promise to deliver a more detailed piece later on.
Fidelity was one firm which took this approach after the UK’s election. On results day, they provided just a brief snippet but followed this up a week later with a more detailed piece about the potential economic and political impact of the outcome.
No need to sound infallible
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 you don’t outline a perfect vision of tomorrow! In fact, if you do, it could turn out embarrassing – imagine if you had written “Theresa May is certain to get a bigger majority in June’s election.”
Not coming across as infallible also means acknowledging that the outcome was not what you expected. If, in May, you said, “We expect June’s election to result in a bigger Conservative majority”, then it’s worth pointing out in June’s commentary that the election outcome was not what you expected. Brewin Dolphin did exactly this in their post-election view point – this stated that “if you received our note earlier this week you will know that we certainly didn’t call this [election] but we did think it was a real possibility.” 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 involves 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 President Emmanuel Macron’s victory should benefit French equities”, discuss what aspects of his policies are growth-friendly and how this is going to translate into stock-market gains. One effective example of such an approach is Blackrock’s recent outlook for US equities.
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.
Don’t be afraid to stand out from the crowd. Most asset managers issued warnings about Brexit in the run-up to last June’s referendum. But that didn’t deter Woodford Funds from publishing commissioned research which showed that there was no long-term case for staying in or leaving the EU. Bold predictions could be the key to making your outlook different from the herd. However, it’s also important to ensure such pieces don’t come across as uninformed opinion pieces, so it’s important to back up your points with solid evidence like Woodford did.
Respect your readers’ sentiments
While outlooks are definitely enriched by clear opinions, sometimes a little circumspection is required – not least when it comes to politics. Today, people are increasingly attracted by “non-mainstream” candidates who do not epitomise conventional political views. By all means criticise politicians and their actions and explain why you believe they could be wrong. But be wary about excessively opinionated labelling such as “crazy president”. However strongly you may feel, there’s no surer route to offending your readers (some of whom could favour such candidates) than caricaturing politicians or mocking their views. This may also impair your credibility as an effective writer. As we’ve said before, its good practice to treat opposing views with respect.
Think outside the box
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 turn into potential clients.
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