- We asked ChatGPT about the market and provided answers to Dan Kemp, CIO of Morningstar Investment Management.
- He called some of that knowledge “amazing”, but he’s not worried that the best strategists will lose their jobs anytime soon.
- “It provides answers, but it doesn’t ask questions like a good investment manager,” Kemp said.
An intelligent language tool ChatGPT can write cover letters, generate messages for dating apps, and provide investment advice.
Inspired by my esteemed colleagues Bea Nolan and Phil Rosen, I decided to see if my insight into the bot market was complete.
I entered the OpenAI program with four questions that investors have in mind today and shared the answers with Dan Kemp, Global CIO of Morningstar Investment Management.
Kemp, who manages about $250 billion worth of assets, was impressed by the quality of ChatGPT’s knowledge and prose, but it lacked the deep analysis of talking to a top stock picker or financial advisor. said.
“The quality of that response is amazing,” he told me. “That said, I don’t see it as a useful investment decision-making tool for either the expert or the layperson.”
“We provide descriptive, generalized, and factual answers,” Kemp added. “But I don’t ask questions like a good investment manager.”
Here are the four questions I asked ChatGPT:
- How to Invest in Recession Times?
- What impact will a Federal Reserve rate hike have on portfolios?
- What investments are good hedges against high inflation?
- Should I invest in cryptocurrencies?
These questions reflect some of the biggest and ongoing concerns of retail investors as Fed rate hikes and high inflation rattled equities and sparked last year’s “crypto winter” after the threat of a recession. I’m here.
ChatGPT quickly put together a series of answers that you would find in any good market textbook.[ing] “In a recession, it’s a company that’s doing well,” he said.
Kemp said he was impressed with the bot’s breadth of knowledge. He was particularly impressed with his ability to avoid unnecessary jargon when creating stock market content.
“It is quite amazing how ChatGPT collects what is known about a particular subject by the investment community and conveys it in a very easy-to-understand format,” he said. “If he’s never used ChatGPT before, it’s really amazing how the engine can do it for different subjects like recessions and cryptocurrencies.”
But bots can only generate what Kemp calls “first-level responses.” In other words, knowledge of the stock market is impressive, but no top Wall Street analyst or his old-fashioned way can apply that knowledge to a particular situation. Financial advisors will.
“I’ll tell you what everyone knows,” he said. “When I asked about inflation hedging, they mentioned inflation-protected assets. Obviously yes, but very limited help in making investment decisions.”
“When making an investment, we need to consider not only the fair return of the investment, but also the transaction price,” Kemp added. “So we need to understand not only the fundamental characteristics of an investment, but also how it is perceived by other investors.”
“It’s what people call second-level thinking, and ChatGPT doesn’t seem to be able to do that.”
Kemp was also interested in ChatGPT’s answers to my cryptocurrency questions. A bot told me that “investing in cryptocurrencies is a high-risk, high-return endeavor” – but rising interest rates mean most digital assets will not offer any returns in 2022. Then the price of the largest token, Bitcoin, plunged more than 60% to below $17,000.
“This was troubling because ChatGPT has clearly learned that in order to get high returns, you usually have to take high risks,” he told me. “This is an interesting mistake, and one that many investors made last year. Not all high risks lead to high rewards.”
Kemp’s feedback matches what people like and dislike about ChatGPT.
Language tools can create high-quality content incredibly quickly, but their words tend to lack character and depth.
So don’t expect it to become your go-to engine for investment advice anytime soon.