Guru Grades

Does Outlook Have Insight? (Last Updated 10/7/08)

We evaluate here the weekly "The Outlook" column in BusinessWeek online by Standard and Poor's since May 2003 (the earliest available). According to Standard & Poor's, "'The Outlook' is a unique investment advisory service...[that] provides solid research, unbiased investment ideas and market perspective... [It] presents investment information and advice in a concise way that helps to clear up some of the mystery surrounding the economy, the stock market, and investments in general." The table at the bottom of this entry extracts highlights from this commentary and shows the performance of the S&P 500 index over the 5, 21, 63 and 254 trading days after the publication date for each item. Red plus (minus) signs to the right of specific items indicate those that the market has subsequently proven right (wrong). We conclude that:

• The "Outlook" throughout the period of this review has been and remains mostly positive about U.S. equities, in general alignment with market performance. We do not have history for "The Outlook" during a persistently declining U.S. equities market.
• Based on subsequent stock market performance and our judgments about the accuracy of "The Outlook's" forecasts, its bottom-line advice about market direction has been correct 49% of the time, about average. Sample size is moderate, as is our confidence in this conclusion.
• As shown in the graph below, "The Outlook's" explicit recommendations for increasing and decreasing exposure to U.S. equities exhibit inconsistent value, sometimes accumulating at highs and distributing at lows.
• BusinessWeek has discontinued the weekly "The Outlook" column. We retain this record for historical reference as part of an overall analysis of guru accuracy.

The following chart depicts the behavior of the S&P 500 index over the period of this review, identifying the points at which "The Outlook" explicitly recommends increasing or decreasing exposure to U.S. equities. The sample of recommendations is too small for meaningful statistical analysis but does not contradict the accuracy assessment above.

In summary, "The Outlook" is a about average in forecasting market behavior, and its explicit timing recommendations are sometimes good and sometimes bad. Confidence in this conclusion is moderate.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the direction of the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.