In this week's video, we ask Andrew Hunt for an update of his 2023, 2024 and 2025 outlook that he tabulated a few months ago. The script has worked OK so far but, as he humbly admits, he might have been right for the wrong reasons in certain cases.  

• The economic data remains very confusing due to the impact of COVID, lockdowns and especially stimulus checks (including their impact on seasonal adjustment models). Headline monthly rates of change are often meaningless even if the inflation numbers have given the market comfort in the last week).

• The US economy slowed in the first half of 2022, likely more than the data reveals. Fiscal policy was very expansionary in Q3 which lifted growth, but this is unlikely to continue in Q4.

• Inflation data has been a bit worse than expected. Personal services and wages in key sectors are seeing faster inflation. The Fed's constant easing of conditions whenever the economy slows may undermine their credibility on inflation.

• There has been a big easing of financial conditions over the past few weeks, driven by the US Treasury bank lending to non-corporate borrowers. This has lifted asset prices across the board.

• The rally may continue into the year-end, but inflation concerns could reemerge in 2024. The Fed may have to resume tightening once they see signs of stagflation.

• Portfolio positioning should stay neutral for now. Duration should be kept relatively short but avoid being overly aggressive. Cyclicals and emerging markets can benefit from liquidity in the short term.

• The UK is experiencing a "silent depression" with unaffordable housing, high prices for cars, meals out etc. Countries like Chile and Brazil which aggressively fought inflation may start to appear more credible.

In the last week, we have seen some quite alarming data around trends in income and productivity for Australia, and this time around Andrew wouldn’t be drawn on Australian data until he has done a deeper dive, such is the confusing and often misleading nature of the headline data at the moment. We are hoping that he might do that in the next week or so which will give us something to chew on.

The tail end of a generally better-than-expected US reporting season included some less buoyant results from bellwether industrials and retail stocks, and we will be also talking to a few fund managers in the next few weeks about any clues they are picking up about the underlying operating environment and consumer demand trends. So far, the market seems to agree with Andrew that a potential recession has been pushed out until next year.

We continue to meet with fund managers to assess the impact of Artificial Intelligence on their businesses, and in some cases, we have also been able to ask about what they are seeing amongst their portfolio companies. In both cases it is not just mixed, it is polarised. Some things are as expected - large companies are doing much behind the scenes and some smaller companies are moving faster. We have a growing sense that 12 months from now we are going to see some winners and losers both amongst listed companies that are able to improve productivity and the managers that are able to best harness AI. We are one of the white-collar professions facing the most heightened risk and opportunity from large language models so perhaps this shouldn’t be a surprise. In a week or so we should be able to summarise these findings and we hope also to have a better feel about how that might affect advisers work lives (spoiler - we think the ‘copilot’ model is going to be ideally suited to the delivery of financial advice for the same reasons that the ‘robots’ have missed the mark so far).