Market commentary: Apr 2023
Portfolio performance
The global “war on inflation” continues and expectations remain that inflation, and therefore interest rates, will remain higher than average for some time yet. Possible recession in the US is worrying investors and in NZ there are concerns that the Reserve Bank has been too severe with rate rises.
The rise of artificial intelligence (what some see as a quantum leap in AI) is creating great excitement in share markets and share prices of the big players like Meta, Google, Apple, and Amazon have risen accordingly.
The year has ended close to flat and the last 6 months reasonably strong. Unrealised losses in bond markets are unwinding but commercial property is yet to recover value – not to worry as prices will recover and in the meantime, cash is still coming in from interest and rents.
Is technology our saviour?
A shortage of labour, higher inflation, and higher interest rates have led to higher costs and reduced profits for businesses. The search is on to adapt and find new ways to manage in this difficult economic environment and do so with less staff. Historically businesses have relied on migration from overseas to fill job vacancies (e.g., in agriculture, farming, and fishing) but this has become less of an option. The main reason for labour shortage is the long-term problem of ageing populations in many advanced economies and not enough young people coming through to replace retirees. As demand for workers increases there’s an expectation that wages will increase too.
Facing a squeeze on profits, companies are likely to increase the use of technology and advancements in sensor technology and computer vision are making it possible for robots to perform an increasing range of functions that in the past have required human touch and judgement.
A great example here in NZ is the SeedSpider an accurate, automated seeding system, and WeedSpider which trundles along rows of vegetables identifying individual weeds, and then removing them. Developed by Greentech Robotics in Palmerston North they are robots that use high-resolution cameras and artificial intelligence software to do their job. Their target market is the USA where farming is experiencing severe labour shortages so it’s no surprise that uptake has been strong. SeedSpider now plants up to 80% of salad and baby carrot crops in the USA and yields are up 10%.
Will technology be our saviour? The answer looks like a yes for business but what about workers? Charles Simon (founder and CEO of Future AI: Technologies that Think) puts it this way “Rather than focusing on which jobs might next be replaced by AI, we will be thinking about what characteristics make us different from AI and, therefore, irreplaceable.”
Richard Grimes, CERTIFIED FINANCIAL PLANNER (CFPCM), Director and Financial Adviser