A Recession Looks More Likely, And Google And Tesla CEO’s Both Praise And Raise Concerns About AI – Forbes AI Newsletter April 22nd

TL;DR

• The New York Fed’s yield curve model now puts the likelihood of a recession at 58%, the highest it’s been since 1982
• Google CEO Sundar Puchai has joined the call for greater regulation of AI, seeing both the disruptive potential and the capacity for misuse
• Elon Musk has also weighed in further to the AI debate, saying that the current language models like ChatGPT have inherent bias and political correctness and that he’d like to create his own version – “TruthGPT”
• Top weekly and monthly trades

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Major events that could affect your portfolio

It’s now been almost a year since a large number of high profile CEOs, economists and financial commentators started predicting that a recession is on the cards.

In mid-2022 we had Elon Musk saying he had a “super bad feeling” about the economy, Coinbase CEO Brian Armstrong saying ‘we appear to be entering a recession’ and JPMorgan Chase CEO Jamie Dimon stating that an ‘economic hurricane’ was on the way.

So far, an official recession has been avoided, with enough positive pieces of economic data (particularly around the strong labor market) keeping the National Bureau of Economic Research from calling it.

But it may not stay that way for long.

The New York Fed has a financial model which analyzes the bond yield curve, and is used to predict the likelihood of a recession. Right now that modeling says that there’s a 58% likelihood of a recession hitting the US, which is the highest probability since 1982.

Combined with economic data that is all trending downwards, it seems like it’s a matter of when, rather than if, a recession is going to hit. The question now is whether the Fed is going to be able to engineer a soft landing, or whether we’ll be hit hard by a falling economy.

Right now most Wall Street banks are predicting a ‘mild recession’ as their base case forecast. As always, investors should prepare for the worst, ensuring their portfolio is as resilient as possible to deteriorating economic conditions.

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AI is an area that investors should be watching very, very carefully. Right now the pace of development in the space is moving at light speed, and while it’s showing some incredible potential across almost every industry imaginable, it’s also causing some concern from tech leaders.

An issue that continues to be raised is that the pace of AI development is creating major risks for society as a whole. For users who are already seeing the huge benefits of using AI in their day to day life (and investment portfolios), these concerns might seem surprising.

But like any powerful technology, the reality is that it can be used for positive forward progress, but also to cause damage by users with bad intentions.

Google CEO Sundar Pichai appeared on an episode of 60 minutes this week calling for greater regulation of AI, saying that “It can be very harmful if deployed wrongly and we don’t have all the answers there yet — and the technology is moving fast.”

He also commented that it shouldn’t be left up to individual companies to decide what is right and wrong within AI.

Elon Musk agrees, though he’s more concerned about the supposed ‘political correctness’ of the current popular AI language models like ChatGPT and Google’s DeepMind. He’s suggested that he may even look to create his own AI free from bias or political correctness, dubbing the idea “TruthGPT.”

One thing is for sure, AI is here to stay, and it’s likely to provide immense value for investors in the coming years, in more ways than one.

This week’s top theme from Q.ai

There’s a lot going on right now. We’ve got a potential banking crisis, stubbornly high inflation, AI adoption growing exponentially and an economy that appears to be teetering on the edge of recession.

For regular investors, it’s almost impossible to keep on top of all this information and make winning trades. That’s why we don’t recommend short term trading strategies and stock picking, because it invariably means you’ll end up with worse returns for a whole lot more headache.

And you don’t need to take our word for it, the stats don’t lie. From 1999 to 2019 the S&P 500 achieved an annual return of 6.06%, while the average retail investor managed just 4.25% per year over the same time period.

So what’s the alternative when markets are looking a little uncertain, but you still want to put your cash in a position to grow over the long term? Well, it comes down to sticking to the fundamentals. That means maximizing your diversification, while sticking to large, trusted names.

With this in mind, we created the Active Indexer Kit. This Kit uses AI to invest in a number of ETFs which represent the US stock market, with the ability to increase or decrease the exposure to the tech sector. Every week our AI predicts how the market is expected to perform, and then rebalances the Kit accordingly.

While it will still fluctuate in value, it provides relatively low risk exposure to the US stock market, which still has the potential to provide immense value to investors over the long term.

Top trade ideas

Here are some of the best ideas our AI systems are recommending for the next week and month.

CVB Financial Corp (CVBF) – The holding company of Citizens Business Bank is one of our Top Buys for next week with an A rating in our Low Momentum Volatility factor. Earnings per share was up 7.1% last year.

Alteryx (AYX) – The data analytics software company is our Top Short for next week with our AI rating them an F in Quality Value. Earnings per share was -$4.65 in 2022.

Halozyme Therapeutics (HALO) – The biotech company is a Top Buy for next month with an A rating in Quality Value. Revenue was up 48.9% in 2022.

Biora Therapeutics (BIOR) – The biotech company is our Top Short for next month with our AI rating them an F in Quality Value. Revenue was down 75.54% in 2022.

Our AI’s Top ETF trades for the next month are to invest in regional banks, natural gas and biotech, and to short US small caps and mid cap value stocks. Top Buys are the SPDR S&P Regional Banking ETF, the United States Natural Gas Fund and the SPDR S&P Biotech ETF and the Top Shorts are the Vanguard Mid-Cap Value ETF and the Schwab US Small-Cap ETF.

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