Forward Guidance
Quick Answer
A company's or central bank's public statements about expected future performance or policy direction.
Corporate Guidance
Companies provide forward guidance to help investors understand management's expectations for future performance.
Types of Guidance: - Revenue projections - EPS estimates - Margin expectations - Capital expenditure plans
Why It Matters: Guidance often moves stocks more than actual earnings. Raising guidance is bullish; lowering guidance is bearish.
Central Bank Guidance
Central banks use forward guidance to signal their policy intentions and manage market expectations.
Fed Guidance Examples: - 'Rates will remain low for an extended period' - 'We expect to raise rates three times this year' - 'Data-dependent' (more flexible, less committed)
Clear guidance reduces uncertainty and helps markets price in future policy.
Trading on Guidance
Key Considerations: 1. Compare guidance to analyst consensus expectations 2. Note any changes from previous guidance 3. Consider management's historical accuracy 4. Watch for qualifier language ('approximately', 'at least')
Common Pattern: Companies often issue conservative guidance to create achievable targets they can beat.