‘Macro’ drives ‘micro’

The headline of the day, in my book, comes in a post on the Wall Street Journal Real Time Economics blog marking the arrival of July 1:

It’s The Second Half — So Where’s The Recovery?

Investor relations professionals may feel the same ambivalence today, as we enter the back half of the year wondering about macroeconomic trends and seeing the big picture’s influence on our companies’ fundamentals (and stock prices).

Investors are trying awfully hard to be there waiting on the dock when the good ship Recovery pulls in. So the market rallies … when Ford’s sales drop only 11% (the best of the automakers) … when manufacturing shrinks, but less than it has been declining for the past year … when unemployment keeps rising but probably at a slower pace. In a market eager to be hopeful, exuberance seems to come cheaply.

Anyway, the second half has arrived – and  let’s hope recovery really is at hand.

One of the challenges of investor communication is to explain how the business cycle works its way through industry and company-specific performance. We need to offer insight into how our P&Ls are affected by changes in product demand, sales volumes, pricing power, cost of materials and so on – and the timing of these changes within the economic cycle. Part of this is saying which “macro” metrics matter to our businesses – and providing the data for our shareholders.

IR people should be students of the macro environment (among other things). Three good sources on the dismal science are blogs that aggregate and report the daily economic news: Calculated Risk, The Big Picture and WSJ’s Real Time Economics. Following all three, of course, could be too dismal for most of us.

Another challenge for IR is to understand how our companies diverge from the economy as a whole. We must explain actions we’re taking to outperform, smooth the cycles or propel the recovery of our P&Ls beyond the macro trend.

The next couple of quarters promise to be interesting. Happy H2!

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