☀️☕️ ChatGPT on the slide?

📊 Also: Stupid cage fight; How much, not whether to hike; China slows and EuroDEflation 🎓️ Soft Landings, Goldilocks and Unicorns

Jul 04, 2023

📈 Market Roundup 06-July-2023

US large-cap S&P 500 closed 0.2% DOWN 🔻

Tech-heavy Nasdaq Composite closed 0.18% DOWN 🔻

Pan European STOXX Europe 600 closed 0.79% DOWN 🔻

HK/China's Hang Seng Index closed 1.57% DOWN 🔻

Japan's broad TOPIX closed 0.01% DOWN 🔻

📝 Focus

ChatGPT on the slide?

📊 In the Markets

Stupid cage fight
How much, not whether to hike
China slows and EuroDEflation

📖 MoneyFitt Explains

🎓️ Soft Landings, Goldilocks and Unicorns

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📝 Focus

ChatGPT on the slide?

ChatGPT, OpenAI’s chatbot phenomenon that became the fastest-growing consumer application ever after its launch only last November, experienced a first ever DROP in website traffic in June, according to Similarweb. (With over 1.5 billion monthly visits, though, it’s still one of the top 20 websites in the world.)

The days before ChatGPT
- Image credit: The 100 / The CW via Tenor

.....▷ The drop in traffic might suggest that the novelty value may be wearing off and that people are going back to The Before Days… or, more likely, it may be that generative AI junkies just want more intense hits with real-time information of the sort provided -often still quite badly- by Google's Bard and Microsoft's OpenAI-powered Bing. (And it may also reflect less use by students for homework and plagiarism as the summer holidays kick in.)

.....▷ Website data also doesn’t capture the smoother version of ChatGPT on iOS, which launched in May. More in-app AI functionality is also hitting the marketplace directly, such as the M365 Copilot (based on GPT-4) on Microsoft 365 office business productivity and collaboration apps

.....▷ And then there is Meta’s open source generative AI code that was released in February, a large language model (LLM) called LLaMA that has been used by developers to create a variety of applications, including chatbots, text generators and translation tools. LLaMA has a simpler architecture than GPT-4 and is more efficient to train and run, making it more usable for developers because it is easier to fine-tune by adjusting the parameters to improve its performance on a specific task.

.....▷ All seems far from over on the AI front… but what forecast growth rate is already priced-in to share prices like Nvidia’s?

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📊 In the Markets

Stupid cage fight: Wall Street went back to work on Wednesday after the Independence Day break but didn’t really do much, with the main indexes ending with modest losses as traders digested minutes from the US Fed's June meeting (see below).

.....▷ Meta traded up ahead of the Thursday launch of its Twitter-clone “Threads, an Instagram app” (maybe this will be a less boring Zuck vs. Musk cage fight), and parcel carrier UPS traded down amid recriminations as talks with the Teamsters Union broke down.

First day of Threads
- Image credit: “Threads, an Instagram app” via MFM

How much, not whether to hike: The minutes of the US central bank’s June rate-setting committee (“FOMC”) meeting showed that “almost all” Federal Reserve officials intend to raise interest rates again to tackle high US inflation. They said below-trend growth and job losses would be necessary to get to the target inflation rate of 2%… but with an increasing chance of the fabled “soft landing”🎓 as they also saw “the economy continuing to grow slowly and avoiding a downturn as almost as likely” as their baseline prediction of a mild recession.

A soft landing🎓 is possible
- Image credit: Tenor

.....▷ The debate was over whether they’ve done enough but need to wait for the impact of tighter policy to feed through (pause) or whether more needs to be done sooner (skip.) "Stretching out into a more moderate pace is appropriate to allow you to make that judgement" over time, Fed Chair Jay Powell said in June. They acknowledged that the job market is “tight” and there are risks of higher inflation, though with uncertainty about the economic outlook, more data is needed for the extent of “additional increases” in rates. 16 of 18 officials expect the interest rate to go up by at least another quarter of a percentage point by the end of the year.

EuroDEflation: European stocks followed Asian markets lower on Wednesday after soggy services data from China showed how badly and how quickly the post-pandemic rebound has fizzled out after three years of severe Covid-19 restrictions. There is still growth in services (above a 50 reading), but less than expected. The June Caixin services purchasing managers’ index came in at 53.9, down from 57.1 in May and below the estimate of 56.2 from Hong Kong’s Finest.

.....▷ Eurozone producer price inflation turned negative in May, with a 1.5% decrease in “factory gate prices” compared to May last year, driven by a significant drop in energy prices. This contraction was sharper than economists had anticipated and showed a startling collapse in inflation pressure. Producer prices can serve as an early indicator of consumer inflation trends, provided the consumer gets a break from price-gouging retailers. Greedflation (or profit-led inflation) is typically seen in end-consumer prices rather than in producer prices.

“For companies, the first rule of price gouging is you do not talk about price gouging. The second rule of price gouging is you DO NOT talk about price gouging." - Paul Donovan, UBS Wealth Management chief economist and amateur heavyweight boxer.
- Image credit: Fight Club (1999) / 20th Century Fox via Tenor

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📖 MoneyFitt Explains

🎓️ Soft Landings, Goldilocks and Unicorns

- This is where after a period of very strong growth, an economy slows down to catch its breath without passing out and needing life support.

- In other words, the demand for goods and services dips by enough that inflation and the overall cost of living are no longer a problem, but without the economy going into recession and leading to severe unemployment.

- It is normal in an economic cycle for economies to speed up and slow down, with inflation and employment levels usually driving the official and unofficial decision-making by central bankers. It takes skill, luck and a lot of guts, even when a central bank is independent of the government it reports to.

- A "soft landing" is known as the Goldilocks scenario... 🥣not too hot, not too cold. It can sometimes also feel as unattainable as a fairy tale ending.