Economic Outlook
- Continued Market Rally: December 2023 saw the continuation of a bullish trend in the stock market. The optimism, fueled by expectations that the Federal Reserve could achieve a ‘soft landing’ for the economy, led to broad gains across various asset classes. Notably, the positive trend extended beyond the technology sector, with several traditionally slower sectors showing significant growth. This shift indicates a wider risk appetite among investors and a more general market optimism entering 2024.
- 2023 Breaks Record for New ETF launches as active managers dive in: A record 530 new ETFs were launched in 2023, of which 73% were active. In total, there were 530 new ETFs brought to the market last year, more than in any other year over the last 10 years, according to data from Morningstar. Mutual fund launches, by contrast, were the lowest they’ve been over the past decade, with just 169 new offerings coming to market. This is almost an exact reversal from 10 years ago, when in 2013, 591 mutual funds were launched versus just 162 ETFs. Over the course of 2023, ETFs took in net inflows of $592bn. Into 2024, these funds continue to attract investors with their potential for higher returns, flexibility and specialized market exposure and thematic investments.
- AI investing in 2024: AI is anticipated to gain further momentum in 2024, driven by technological advancements and increasing market acceptance. Investors are showing growing interest in AI-driven funds and strategies, as these tools continue to demonstrate their ability to outperform traditional models. Key trends include the integration of machine learning for real-time data analysis, the rise of automated advisory services, and the growing focus on advanced investing through AI algorithms. This year is set to witness more sophisticated AI applications in portfolio management and financial forecasting.
Performance
StockSnips’ AI-driven portfolios have demonstrated strong performance against both passive index funds and certain comparable momentum active ETFs, across various timeframes. Over a three-year period, three of StockSnips portfolios have yielded cumulative returns that surpass those of the SPY. On a year-to-date (YTD) basis, our equal-weight models have resulted in more modest gains compared to SPY, partly due to the significant influence of the ‘Magnificent Seven’—a septet of stocks contributing largely to SPY’s return.
The Invesco S&P 500 Equal Weight ETF (RSP) itself saw a 13.70% return in 2023, and it’s worth noting that almost all of StockSnips portfolios have exceeded this benchmark in 2023. . StockSnips AI Monthly Quality All Cap Strategy has outperformed several high-profile momentum and AI-driven active ETFs over a three-year period. StockSnips remains committed to long-term growth but also strategic diversity in our portfolio holdings, that tend to steer clear of an over-dependence on the market’s concentration.
How Do We Achieve This Performance?
Our signals are a robust proxy for investor sentiment which drives price, in addition to fundamentals like revenue & earnings growth estimates. This unique, technology-driven approach enables us to capture market movements effectively & more quickly with frequent rebalancing, driving superior returns for our investors.
2024 Look Ahead: AI Applications in Investing
- AI-Driven Evolution in Risk Management: The coming year holds the promise of a transformative shift in risk management, with AI set to play a pivotal role. We anticipate groundbreaking advancements in AI algorithms that can predict and mitigate risks with unprecedented precision. This evolution signifies a new horizon in proactive risk management, empowering us to safeguard investments with a level of foresight previously unattainable.
- Prioritizing Ethical AI and Ironclad Data Security: As AI solidifies its role in the financial sector, adhering to the highest standards of data security and ethical AI practices becomes even more vital. In light of recent cautions from SEC Chair Gary Gensler against “AI washing” – the practice of making misleading or false claims about AI capabilities, akin to the greenwashing in environmental sustainability – firms must be committed to ensuring full transparency in AI initiatives & central to our approach is the focus on the explainability and interpretability of our Machine Learning Models to allow investors to be as confident in AI’s integrity as they are in its performance.
- AI as a Catalyst for Hyper-Personalized Financial Planning: In 2024, we anticipate a significant leap in the application of AI towards creating hyper-personalized financial planning experiences. This trend will see AI not just as a tool for portfolio management, but as an integral part of crafting individualized financial roadmaps. By analyzing a vast array of data points – from market trends to personal financial goals and life events – AI systems will offer insights and strategies tailored to each investor’s unique journey. This move towards deeply personalized financial advice represents a new frontier in investor engagement and financial empowerment.
StockSnips has been leveraging the power of AI in investing for over 7 years & along with the existing suite of SMA strategies, is set to launch Active AI-driven ETFs in the coming months. While the large firms are not making this technology available to RIAs, StockSnips AI Portfolios help to improve firms investment efficiency and remain low cost for high performing active strategies. By automating the analysis of large volumes of unstructured news and deriving a powerful sentiment signal, StockSnips allows RIAs and Asset Managers to focus more on strategic decision making and client servicing. The reduced costs and increased productivity offered by StockSnips make it an essential tool for RIAs seeking innovation to optimize their practice & maximize client satisfaction.