2023 | June 26

The Market

Stocks Break Streak

The major U.S. stock indexes each fell more than 1%, breaking strings of eight consecutive weekly gains for the NASDAQ, five for the S&P 500, and three for the Dow. Concerns about further interest-rate hikes and a slowing global economy weighed on stocks.

An index that measures investors’ expectations of short-term U.S. stock market volatility slipped, extending its recent decline to the lowest level since January 2020. On Friday, the CBOE Volatility Index (VIX) closed at 13.4—just above its level before the start of the COVID-19 pandemic and down 33% from a recent high on May 24.

As the United States and some other major economies assess whether to slow down or pause their inflation-fighting policies, the United Kingdom’s central bank went in a different direction, lifting its key benchmark interest rate by half of a percentage point. Thursday’s steep increase raised the rate from 4.5% to 5.0%, the highest level since 2008.

The price of Bitcoin, the most widely traded cryptocurrency, surged nearly 18% for the week to around $31,000 on Friday. Although Bitcoin was trading at less than half of its record high of nearly $69,000 set in November 2021, the price had risen nearly 90% year to date as of Friday. 

Approaching the midpoint of 2023, the U.S. stock market’s top performers look a lot different than they did at this point in 2022. This year, information technology companies dominate the list of S&P 500 stocks with the biggest year-to-date returns; in 2022, all 10 of the leaders as of June 22 of that year were energy firms, according to The Wall Street Journal.  

In testimony before Congress, U.S. Federal Reserve Chair Jerome Powell said there’s still “a long way to go” in the Fed’s campaign to reduce inflation, and further interest-rate increases are likely to be needed in coming months. After keeping rates unchanged at its last meeting, the Fed will consider whether to resume rate hikes at its July 25–26 session. 

Anxiety about economic growth prospects and energy demand weighed on prices of crude oil, which fell nearly 4% for the week. U.S. crude fell below $70 per barrel on Thursday, and Friday’s price of around $69 was down almost 17% from a high recent high on April 12.

A report scheduled to be released on Friday will show whether a recent slight monthly rise in U.S. inflation extended into May, as measured by the U.S. Federal Reserve’s preferred gauge for tracking prices. The most recent report showed that the Personal Consumption Expenditures Price Index rose at a 4.4% annual rate in April, up from 4.2% in March—a reversal of the downward trend in the prior months.

Source: John Hancock Investment Management

Changes to Retirement "Catch-Up" Contributions

What Do You Know About AI's Limitations?

As you read about AI, you are likely to encounter some confusing terminology. The U.S. General Accounting Office (GAO) explained that generative AI is “a technology that can create content, including text, images, audio, or video, when prompted by a user. Generative AI systems create responses using algorithms that are trained often on open-source information, such as text and images from the internet. However, generative AI systems are not cognitive and lack human judgment.”

The last sentence in the GAO’s definition is quite important. See what you know about AI’s limitations by taking this brief quiz.

1. Research scientist Janelle Shane, who writes AI Weirdness, trained a neural network with data from 30,000 cookbooks and asked it to suggest new recipes. Which of the following recipes did it NOT suggest?

a. “Chocolate Baked and Serves” – a brownie recipe featuring a cup of horseradish

b. “Ethan’s Eggs” – made with pancakes, sugar, and Skittles

c. “Small sandwiches” – everything but the cheese spends an hour in a food processor

d. “Good Wine Drained Chili” – a chicken dish made with milk, garlic and chocolate chips

2. An attorney asked a generative AI chatbot to help him draft a legal brief. What did the chatbot do?

a. Referenced fictional past court cases that were fabricated by the chatbot

b. Created a deepfake video showing the client being injured

c. Created a deepfake audio file of flight attendants discussing the client’s alleged injury

d. Wrote the brief in the style of Shakespeare

3. The bellhop robots at a Japanese hotel were “let go” after they:

a. Consistently left skis and snowboards in the elevators

b. Delivered luggage to the wrong rooms

c. Ran into walls and tripped over curbs

d. Kept delivering toothbrushes when guests requested phone chargers

4. A Scottish soccer team opted for AI-operated cameras that would track the ball and provide better television footage than human camera operators. The choice infuriated fans because:

a. The fans didn’t want people to lose their jobs

b. The AI mistook a ref’s bald head for the soccer ball and kept zooming in on him

c. The AI confused the stand entrances with the goals, causing fans to miss the action

d. The AI kept zooming in on the goal whenever it anticipated a player would score

Answers: 1) b; 2) a; 3) c; 4) b 

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eMoney

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Advyzon

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