Daily Commentary

MarketMinder’s View: This article runs through a number of AI- and AI-related stocks, so please keep in mind that MarketMinder doesn’t make individual security recommendations. We also think the title of this piece is perhaps a bit on the dismissive side, as an actual slowdown in AI spending could be bad for chip stocks. Today, though, that fear seems more false than real, as the piece goes on to document. The inspiration for the piece appears to be the discussion from over the weekend, after Anthropic CEO Dario Amodei published a 3,800-word essay calling for “pacing” in “frontier AI model development”—a slowing in the most advanced experimentation—on security concerns. Many presume such a slowing would hit Tech spending on data centers and, hence, chip stocks. But as this documents, the actions of these firms don’t demonstrate much slowing, and the calls to this point largely seem limited to the creation of third-party review boards to examine model development. Beyond that, the essay reads largely like a call for regulation and a skeptic could easily see this as the big hyperscalers and developers trying to pull the drawbridge up behind them and limit competition, particularly from Chinese firms. Now, maybe that is too skeptical. But as noted herein, “A useful exercise is to consider how AI companies describe the path to safer AI and ask whether it indicates less spending. Last month, with an urgency echoing the ‘pause’ talk of the past few days, more than 100 AI companies … put out a joint statement arguing that companies should make it ‘an immediate leadership priority’ to protect from AI harm — whether that be vulnerabilities discovered by supersmart models or models acting in unexpected ways. How might they do that? ‘Today’s AI advances are already giving defenders new ways to fix weaknesses that have accumulated for years,’ the letter suggests. It appears the solution to the AI problem, handily enough, is more AI. That doesn’t sound like a slowdown in demand.”

MarketMinder’s View: This is kind of hybrid coverage that blends together a political promise (reminder: we favor no party nor any politician), personal finance and an economic data point. The data point in question is average UK wage growth in the three months to July, which came in at 3.9% y/y, matching expectations but slowing from 4.2% in the prior three-month period. These data, in and of themselves, aren’t all that meaningful, being a late-lagging function of past price pressures that employers incorporate after the fact. But they do have one personal finance implication: Under the UK’s “triple lock,” pension benefits are adjusted annually for the higher of three possible factors: 2.5%, the September inflation rate or average wage growth. If expectations for CPI hold, this 3.9% wage growth would be the adjustment. Hence: “This implies the full new state pension will rise from £241.30 a week (about £12,500 a year) to £250.70 a week (about £13,000 a year) from next April. For the two-thirds of pensioners who reached qualifying age before April 2016 in receipt of the old basic state pension, it will mean a rise to £192.10 a week (about £9,990 a year).” Now, this bumps up against frozen tax bands that limited tax-free allowances to £12,570 before, which would in theory make some of this increase subject to tax. But politicians are already promising that they will address this in the forthcoming budget and eliminate that issue. At any rate, consider this news you can use if you are a UK pensioner.

MarketMinder’s View: This is basically a synopsis of conventional “wisdom” on what long-term interest rates and possible Fed hikes to short-term rates mean for markets. As such, there are some loosely sensible points, like scaling the change in 10-year yields from 2016 to now to highlight the additional reward in the bond market for people who may need a bond allocation as part of their portfolio strategy. But it also lumps in a whole lot of nonsense. For one, there is a bunch of recency bias demonstrated here in both thinking the recent upturn will persist and in assuming the present rates are high. They are indeed higher as the title presumes. But by historical standards, low rates in the 2010s are really the abnormal factor. The back part of this also presumes that the twin effects of higher rates and lofty valuations are a headwind for stocks. But neither of these factors would pass a historical test—stocks rose dramatically in the 1990s with rates around current levels or higher and high valuations. These factors just aren’t predictive, operating too much on widely known factors and past market movement, which never predicts.