Market commentary: Feb 2023

Portfolio performance 

It’s been a great start to 2023 for global share markets with the MSCI World Index up 6.4%, the US S&P500 up 5.9% and New Zealand’s NZX50 is up 2.6%. High inflation remains the key driver with prices moving as market participants look for signs that inflation will ease (prices rise) or persist for longer (prices fall). Key takeaways from the recent meeting with our research consultant are; global growth remains strong and above expectations, longer-term inflation is likely to remain higher, and NZ and Australia have more growth potential than most developed markets. The steep rise in interest rates has caused unrealised losses for fixed interest which will wash out over time. The good news is cash flow from interest will increase. Overall, this translates to negative portfolio returns for the year to 28 February and close to flat returns for the last six months.

Artificial intelligence (AI). Should we be optimistic or frightened?

I happened to catch this Radio NZ interview with Professor Michael Witbrock of University of Auckland School of Computer Science discussing artificial intelligence and its possible impact on society. As AI is making headlines in the news, I thought you would be interested in his views…

Professor Witbrock set the scene commenting that for the first time in human history, we have technology that has its own intelligence and it’s different to the way we think. Even more remarkable is that it’s available to anyone connected to the internet.

He is certain AI will advance and one area he talked about is the potential for AI to have a conversation with a large group of people at the same time. I summarise his thoughts as follows:

Optimism
This would be useful in situations like cyclones where an AI could have individual conversations with everyone affected simultaneously, talking them through how to prepare, telling them when power is going to come back etc, and do all of this while considering real-time updates and the situation of everybody else.

Frightening
On the flip side, AI systems (being intelligent and able to learn) have the power to persuade large groups of people. These systems will enable the kind of conversation where you’re not just persuading a single person but simultaneously persuading a group by guiding the conversation and persuading them to talk to each other to reach a pre-determined outcome. Clearly, this presents an enormous risk of further allowing automated propaganda on a scale that currently isn’t possible – even on the internet where it’s already a big problem.

One interesting comment he made was the possibility we all end up with our own AI system not only helping, but looking out for us and looking for cases, e.g., where someone is trying to persuade us of something that we should consider carefully whether we want to be persuaded of. Imagine!

Richard Grimes, Director and Financial Adviser