Stock market analysts crawl obsessively over the numbers.
Every figure in every line of the company accounts is diligently entered into the spreadsheet. A fraction of a percentage point down here, a notch up there can flip a decision from “Sell” to “Buy”.
Perhaps they should pay as much attention to the words.
Take Lloyds. For a while now, Britain’s most improved bank has won plaudits for its turnaround despite fears over its 100% exposure to the UK economy.
The language from the bank has been mostly upbeat and emollient.
Today, though, it’s subtly shifted. Where once was “confidence”, now is “disappointment”. Talk of “resilient” conditions has switched to “challenging” and “uncertainty”.
It is a deliberate change in tone. The economy — to which banks are so sensitive — is getting tougher. And if you’re still only interested in the numbers, here’s one: impairments for bad debts are up 28% in the period.
Concerns about the UK have led some investors to switch to Barclays, seeking comfort in its international spread.
But if last night’s US rate cut didn’t give pause for thought on that score, a warning from Shell today might. The biggest provider of dividends into UK pensions says it may have to hold onto more cash than it thought due to weak global demand. Share buybacks may be reined in. Add that to BP’s cautious stance on its dividend and you build up a picture.
Shell talks of “prevailing weak conditions”, the “challenging outlook” and “uncertainty”.
Important things, words. Investors should heed them more.
