I hope you are well and that 2023 is off to a great start. After a very long and uncomfortable 2022, I am hopeful that the worst is behind us and that we can look forward to a better market this year. At least we’re off to a good start. While all the major indexes are up so far this year (the Dow up 2.25% YTD, the S&P 500 up 6% YTD, and the Nasdaq up 12.7% YTD), we’re still well below the all-time highs from early January 2022 (October 2021 for the Nasdaq).  How soon we get back to those highs will depend on earnings and how well corporations manage the current environment of higher inflation, higher interest rates, and the Federal Reserve intent on slowing the economy. We’ll see, but I am hopeful.

You have likely seen a lot of buzz recently around Artificial Intelligence (AI) and the latest efforts by Open AI (a private company) and their website ChatGPT.  What is AI you ask?  It is the simulation of human intelligence processes by machines, especially computer systems.  Specific applications of AI include expert systems, natural language processing, speech recognition, and machine vision. ChatGPT is a very simple website that allows users to interact with an AI system that has been trained to interact with users in a conversational way. It can answer questions, follow prompts, and it is programmed to further learn from interactions with its users.

To show you the range of what it can do, I first asked ChatGPT to write a haiku about the stock market.  Here’s what I got back:

Stocks rise and fall fast
Volatile market in play
Invest with caution, wise

Not bad. It follows the rules for a haiku poem and is about the stock market. If ChatGPT just found this little poem on some other website, that’s not really AI – that’s a search engine. For it to be AI, the software would create this poem on its own by knowing and satisfying the requirements of a haiku, by knowing some of the most general ideas of the stock market, and then bringing those understandings together to create the poem. Whether ChatGPT found this poem or created it on its own is unclear.

Next I tried something a lot more complicated. I asked ChatGPT to write a 500-600-word article discussing the performance of the US equity market in January 2023 describing the most important influences on the market’s performance.

Within two or three minutes I got back the following article, totaling 553 words. As I read the response, I was amazed the software could write in ways we have all learned over the years – an introductory paragraph, further descriptions of the points articulated in that introduction, and then a conclusion. It reads very much like any article you might find in a newspaper or magazine. Quite remarkable.

Before I take my red pen to grade this article, I’ll give you a chance to read it for yourself.

The US equity market experienced a strong start in January 2023, with both the Dow Jones Industrial Average and the S&P 500 index reaching record highs. This performance can be attributed to a combination of factors, including the continued economic recovery from the COVID-19 pandemic, a new administration in the White House, and vaccine distribution efforts.

One of the key drivers of the market’s performance in January 2023 was the ongoing economic recovery from the COVID-19 pandemic. The rollout of vaccines has helped to alleviate some of the uncertainty and fear that had gripped the market in previous months. This has in turn led to increased consumer and business confidence, which is a crucial factor for economic growth. The latest data on employment and gross domestic product (GDP) also suggests that the economy is continuing to recover, which has helped to boost investor sentiment.

Another significant influence on the market’s performance was the recent change in administration in the White House. The new administration has introduced a number of policies aimed at supporting the economy and boosting growth. This includes increased spending on infrastructure, stimulus measures, and a more pro-business stance. These policies have been well received by investors, who see them as a sign of stability and predictability in the market.

In addition to these factors, the market was also positively impacted by vaccine distribution efforts. The acceleration of vaccine distribution has been a major catalyst for the market, as it has led to increased confidence in the near-term economic outlook. With more people becoming vaccinated, the risk of new outbreaks and lockdowns is reducing, which is a major positive for businesses and the economy.

The technology sector was one of the main beneficiaries of the positive market sentiment in January 2023. Companies in this sector have been some of the biggest beneficiaries of the shift towards remote working and online shopping that was accelerated by the pandemic. This trend is expected to continue, as businesses and consumers have become increasingly reliant on technology in the wake of the pandemic.

The healthcare sector was also a strong performer in January 2023, as the rollout of vaccines has led to increased demand for healthcare services. The healthcare sector has been a key beneficiary of the pandemic, as increased demand for medical services and supplies has driven up prices. This trend is expected to continue in the near-term, as the pandemic continues to impact the global economy.

The energy sector was another sector that performed well in January 2023. The price of oil has been increasing in recent months, as increased demand from a recovering global economy has outstripped supply. This has been a positive for companies in the energy sector, as higher oil prices have led to increased profits.

In conclusion, the US equity market experienced a strong start to 2023, with record highs being reached in both the Dow Jones Industrial Average and the S&P 500 index. This performance can be attributed to a combination of factors, including the ongoing economic recovery from the COVID-19 pandemic, a new administration in the White House, and vaccine distribution efforts. With a continued recovery in the economy and vaccine distribution efforts, the market is expected to remain positive in the near-term, although investors should remain cautious, as any negative developments could quickly impact market sentiment.

So here are some issues with the article:

  • It talks about the Dow and S&P 500 reaching record highs in January 2023. We all are painfully aware that that that is not the case.  These two indexes hit record highs in January 2022 but not 2023. Maybe the software is thinking that the Dow and S&P 500 closed at highs for 2023 (which they did), but it is inaccurate to say, or even imply, that those indexes hit record highs in January 2023.
  • The factors that it attributed to the strong month (economic recovery, new administration in the White House, and vaccine distribution) seem quite outdated. Maybe those would have been the case in late 2020 heading into 2021, but not now.
  • There is no mention of inflation, rising interest rates, or the Ukraine war in the article. These factors are much more important than the ones cited.
  • The article highlighted technology, healthcare, and energy as the sectors of the market that did the best in January 2023. That is not the case either. While technology was up a bit more than 9.3% in January, I would not attribute that return to those factors mentioned in the article.  Remote work, online shopping, and the pandemic are outdated and not likely the drivers of the technology sector last month.
  • The healthcare sector was down 1.8%, while the energy sector was up 2.8% and neither were among the best performing for the month. The two best performing sectors in January 2023 were consumer discretionary (up 15.1%) and communications services (up 14.8%). Neither of these actual best-performing sectors were mentioned in the article.

Overall grade? D+ at best. The article is well-written, but the attributions are not timely and there are significant inaccuracies and outright errors that cannot be ignored.  Further, the article seems quite formulaic and not particularly insightful even if it were talking about 2021 or 2022.

On the one hand, this demonstration of AI is quite impressive. But at the same time, it also shows that AI is still very much in its infancy.  It will be fascinating to see how AI evolves over time and how people ultimately use it. At least for the time being, I will not be asking ChatGPT to write my client emails.  If you’d like to try ChatGPT on your own, here’s a link:  https://chat.openai.com/.  You will be asked to register for the site, including providing and verifying your email.

If you have questions or would like to talk, please let me know.

Cheers!