To yield or not to yield

Last week, stocks and bonds were still bruised from the ‘hawkish pause’. The US Federal Reserve (Fed) announced last Wednesday that it would hold interest rates steady at 5.25-5.5% but threw in some stern forward guidance to dispel any doubts it might be easing off. Fed Chair Jay Powell’s talking points were much the same as they have been for the better part of two years: the US economy is still strong, inflation is too
high, and consistently tighter monetary policy will be needed for the foreseeable future. The central bank backed up its words with its ‘dots plot’ projection that showed another rate rise this year and holding steady in 2024. It was a reaffirmation of Powell’s commitment to keeping rates higher for longer.

Trojan Horse tech

The Artificial Intelligence (AI) theme is hard to get a handle on from an investment perspective. In one sense, the potential for generative AI to aid countless people and businesses is obvious. But in another, the stock market boom for AI-related companies has at times looked like irrational exuberance. We are not at dotcom levels of hype (yet), but ‘machine learning’ and ‘language models’ have reached corporate buzzword status. Are these new technologies a revolution waiting to happen, or a bubble waiting to burst? Answering that question requires a deep understanding of both the intricacies of cutting-edge computer science and financial markets – areas that unfortunately tend to have little overlap.

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