Hi. I’m Phil Rosen. Today’s newsletter covers everything you want to know about how the viral ChatGPT language tool is colliding with the world of Wall Street.
But first let’s recap the Fed’s 25-basis-point interest rate hike.
Lundy Wright, partner at Weiss Multi-Strategy Advisers and longtime Fed watcher, told me the key from Wednesday was Jerome Powell’s emphasis on financial conditions being tighter now compared to a year ago.
“Similar to the FOMC meetings of the past few quarters, investors are demanding detailed, expected and absolute hawkish statements,” Wright said. “Powell simply hedged statement after statement with conditionality, and the markets chose to focus on that as a sign that the Fed will not be hawkish going forward.”
Investors cheered the central bank chair’s comments, and stocks rallied through the close.
Now that you have something to say around the water cooler, let’s get to the bots.
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1. Wall Street is clamoring to ride the ChatGPT wave, and investors are pouring into anything that has exposure to the budding artificial intelligence sector.
Microsoft’s $10 billion investment in ChatGPT’s parent company OpenAI has only fueled enthusiasm, and it’s not just chip-makers like Nvidia that have attracted new shareholders. A batch of obscure small-cap bot stocks have made sizable gains, and certain Chinese AI stocks have climbed 60% in a matter of weeks.
Take software firm Versus Systems, for example. The tiny B2B technology company skyrocketed more than 400% at one point on Wednesday after it announced a deal involving AI.
Expectations at the intersection of bots and finance are also burgeoning. A new JPMorgan survey showed 53% of traders believe AI will have the greatest influence on trading over the next three years.
Chris Natividad, chief investment officer of Equbot, is no stranger to this realm. He helps run the AI Powered Equity ETF, which launched in 2017 and leverages IBM’s Watson supercomputer.
He told me on a call last night that today’s bots are only scratching the surface of what’s possible.
“We use AI with everything from maps to shopping and health screens, so to think it’s not going to become a larger part of the investment space is a little bit misguided,” Natividad said. “It’s happening.”
The fund has gained popularity this year as people began to notice that the AI-driven ETF was beating the S&P 500.
While many asset managers are limited to decisions based on traditional market data, AI can go through sentiment-based intel like tweets or online text.
That gives it room to make recommendations based on patterns that human stock-pickers can’t always recognize.
“These tools are improving, and the operators that are using the algorithms are improving,” Natividad said. “They’ll become more accurate. The theoretical accuracy of a model is meant to improve, get better at picking assets.”
What will AI’s impact be on trading and markets? Tweet me (@philrosenn) or email me (email@example.com) to let me know.
In other news:
2. US stock futures rise early Thursday following the Fed’s latest interest rate decision. Meanwhile, Meta stock surged almost 19% in premarket trading after the company beat revenue estimates and announced a $40 billion stock buyback. Here are the latest market moves.
3. Earnings on deck: Alphabet, Apple, and Amazon, all reporting.
4. Nuveen investment chief Saira Malik oversees $1.1 trillion in assets. She favors fixed income over stocks right now, as she hasn’t found much comfort in the recent equities rally. Here’s how she thinks investors should position themselves for post-recession profits.
5. The stock market just hit a rare trifecta of bullish indicators. “You should be bullish for this year,” Jeff Hirsch said. “The market is probably going to go up significantly higher, so look for good opportunities.”
6. The stock market rally will fade as the Fed combats inflation and a recession hits, according to a Credit Suisse strategist. High prices aren’t going away anytime soon, and that could spark a sell-off in the second-half of the year, Patrick Palfrey warned. He warned that any short-term gains could be fleeting.
7. Peloton stock soared 26% on Wednesday after the CEO teased an “epic comeback”. The fitness equipment maker has struggled to sustain its Covid-era success, but chief exec Barry McCarthy said a turnaround is near. “We’ve put to bed questions about the viability of the business.”
8. This real-estate investor has acquired over 50 properties. He said that you shouldn’t be scared of what’s going on in the housing market right now, especially as home prices fall and rents drop. He shared his best advice for using the BRRRR strategy in the current landscape.
9. MsDowJones shared her top seven money must-do tips for staying ahead in 2023. Haley Sacks recommended reviewing your expenses on a monthly basis, and suggested automating investments and savings. Here’s what she had to say about buying that daily cup of coffee.
10. Cathie Wood’s Ark Invest said bitcoin could hit $1.5 million by 2030. That bull-case would mark a 6,326% increase from current levels. The firm’s bear-case scenario still puts bitcoin at $628,800 by that time.
Curated by Phil Rosen in Los Angeles. Feedback or tips? Tweet @philrosenn or email firstname.lastname@example.org
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.