Can you use Chat GPT to Invest?
Looking forward to 2023
Asset prices have risen in the first few weeks of 2023, this is a much-welcomed surprise against the backdrop of a painful 2022. Stocks, bonds, real estate, gold, and crypto were all down (most were down double digits) but we are getting a few good weeks to start off the year. This doesn't mean we are out of the woods, there is a lot of macroeconomic data that suggests our economy is slowing down, but GDP and the labor market remain strong for the time being.
Some sectors are getting squeezed more than others, for example, we have clients who are contractors that still have more than they can even take on. Other sectors like technology and investment banking are laying off thousands of employees and have shrinking profit margins. Data coming from the housing market is grim, primarily due to the fact that many people purchased a home with an interest rate of 3-4% and now you would be lucky to get 6-7%. As a result, this dramatically reduced the amount someone can afford to spend on a new home, and therefore people are content staying put for the time being. Homebuilders and mortgage lenders are feeling the pain that will likely continue until there is a change in monetary policy.
Our outlook for the year is a mixed bag as there are definitely some positive tailwinds for markets, including the incredibly strong labor market, the continued easing of supply chain constraints, China reopening their economy, robust GDP growth, and easing of inflation. However, these are also some of the things that will be headwinds for markets. The tightness in the labor market and strong GDP growth will make inflation harder to break down below the FED’s 2% target. If there is growth in the economy and wages rise that means consumers will have more discretionary income to drive up prices. The FED has implicitly stated that they need a recession to bring inflation down before it becomes entrenched in consumer decision-making. If there is a clear breakdown in inflation while growth remains strong, that would be very bullish for markets, but it's unclear if the FED will be able to accomplish the incredibly difficult challenge of over-tightening and causing a recession.
What's the deal with ChatGPT
If you haven't already, take some time to check out ChatGPT. It is a machine learning algorithm developed by OpenAI and is built on a data set of 170 BILLION parameters. It is able to help streamline and complete tasks that can be difficult and time intensive. In 2023 the newest iteration of this technology will be orders of magnitude better than it is right now. Investors, in particular large traders on Wall Street, have used algorithms to make money with high-frequency trading by placing millions of trades instantaneously to profit off of arbitrage in the market. These algorithms are not providing unique insight into investing, they are just executing a task incredibly well. We wonder what will happen when artificial intelligence is used to actually give contrarian insight into markets and develop profitable strategies for investors. As technologies like ChatGPT improve at an exponential rate, it's not inconceivable that they will eventually be better at humans at most tasks, but will there still be room for human insight that AI won't be able to match? Without a doubt these technologies will dramatically change how work is done.
Please note: This content is not a direct recommendation for investment. Investing involves risk including the potential loss of principal. Not all investments are suitable for all people. Crosby Advisory Group, LLC is a registered investment advisor in Ohio, Florida, and Texas.