The buzz around artificial intelligence (AI) stems from its potential to revolutionize industries and transform the way we live and work. AI can analyze vast amounts of data to provide insights and predictions, making it a powerful tool in fields such as healthcare, finance, and marketing. AI can also automate repetitive tasks, freeing up human workers to focus on higher-level tasks that require creativity and critical thinking. Finally, the potential for AI to continuously learn and improve its performance is a major source of excitement, as it can lead to unprecedented advancements in fields such as robotics and automation.

We have a confession. The previous paragraph was not written by us, but in fact, was authored by Open AI’s ChatGPT program in response to our simple prompt. ChatGPT is the first artificial intelligence tool made widely available to the public and has already surpassed 100 million users, just two months after its launch. The speed of adoption makes ChatGPT the fastest-growing consumer internet app ever. Its popularity has sparked excitement and even concern related to AI, which most people assumed was only relevant in sci-fi movies.

It is far too early to tell what the impact on our daily lives will be from AI. However, parallels can be drawn to the initial reaction to other new technologies like personal computers and the internet. In these instances, excitement was met with fear, but ultimately led to unimaginable advances in how we live and work.

U.S. companies have already started to integrate generative AI into their products: Microsoft has added AI features to its search engine and Adobe has woven AI into its content creation tools. As investors, we are always looking toward the next innovation that could unlock economic value.

Time will tell if these advances lead to meaningful change or compelling investment opportunities, but it may not be a bad time to re-read your favorite sci-fi novel.

In a 1996 episode of “Seinfeld,” the concept of a “Bizarro World” is introduced where Bizarro Jerry is reliable and considerate and “up is down and down is up.” Today’s stock market can feel a bit like that, with good economic news sending stocks lower and bad economic news boosting markets. Last month, the U.S. Bureau of Labor Statistics released employment data for January that blew away expectations. The economy added 517,000 jobs, the most in 6 months, and well ahead of analyst estimates of 185,000. The unemployment rate ticked down to 3.4%, a 53-year low!

The stock market was down over 1% on the good news. “Bizarro World” indeed.

Driving this counter-intuitive market is the interpretation of how each data point might direct future interest rate policy from the Federal Reserve. The Fed is on a mission to slow inflation by cooling off the economy. Each data point suggesting the economy is still strong can be interpreted as more fuel to the “higher interest rates, for longer” fire.

Our next big data point comes on Friday as we get an update on jobs and unemployment for February. We will see then if we remain in this Bizarro Market, or if up can once again be up.

Best regards,
The Sandhill Research Team

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