Billions-Inspired Hedge Fund Founder: AI Makes Me Froggy

GM and BRRR.

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Steve Cohen, the famous founder of Point72 and new owner of the New York Mets, declares "we're going up" amidst the AI productivity boom. He expects profitability and margins to soar as automation reduces costs for many core business functions.

While Cohen’s forward-looking worldview has an optimistic tilt, Federal Reserve officials are stuck analyzing backwards-looking and lagging indicators of the economy, and are still considering rate hikes, per comments from Dallas Fed President Logan earlier this morning.

It’s looking a bit more likely that the overtightening continues into the June meeting, but there is still a good amount of data to digest ahead of the next interest rate decision.

Here’s what we brrr’d today:

• Margin Expansion Dilemma: Can AI Replace Profits and Jobs Simultaneously?

• A Fed Divided: Inflation Drives Wedge Among Fed Officials

Margin Expansion Dilemma: Can AI Replace Profits and Jobs Simultaneously?

• Point72 Founder Bullish: Steve Cohen, the founder of the hedge fund that inspired the Showtime series Billions proclaimed “we’re going up” at a private event this week, due to AI productivity boom.

• AI Productivity Boost: According to Goldman Sachs, the adoption of artificial intelligence (AI) has potential to significantly enhance US productivity growth by approximately 1.5 percentage points per year over a decade.

• Margin Challenges: Cohen, like other hedge fund managers, recognizes concerns about the “types of jobs that will be displaced,” but expects profit margins to improve, reducing the need for aggressive interest rate hikes.

• Long-term Drivers: Goldman Sachs highlights the challenges to margin expansion, including wage growth, interest rates, and elevated inventories. These factors, along with potential shifts in labor and profit shares, may limit margin growth.

• Recession Risk: The possibility of an economic recession poses a significant near-term downside risk to profit margins. Goldman Sachs warns that during past recessions, S&P 500 net profit margins have experienced substantial declines. Cohen's bullish outlook recognizes the importance of avoiding a downturn to sustain market momentum.
  ZeroHedge

A Fed Divided: Inflation Drives Wedge Among Fed Officials

• Stubborn Inflation: Core inflation, excluding food and energy, eased slightly to 5.5% in April from 5.6% in March and a peak of 6.6% in September 2022, but it has not fallen significantly since January 2023.

• Uncertain Rate Hike: Federal Reserve Bank of Dallas President Lorie Logan expressed the view that economic data does not currently support a pause in rate hikes, indicating the possibility of ongoing rate increases.

• Differing Views: Some Fed officials advocate for a pause in rate hikes to allow the effects on growth and inflation to materialize, while others express concerns about the risk of a deep recession if borrowing costs continue to rise.

• JPowell Speaks: Chair Jerome Powell's upcoming June 14th speech at a Federal Reserve economics conference is awaited for potential insights into the Fed's intended policy trajectory, although the specific focus of the speech is uncertain.

• Inflationary Pressure: Core inflation, which excludes food and energy prices, has shown limited improvement, suggesting persistent inflationary pressure despite a decline in headline inflation. The Federal Reserve closely monitors economic data to assess the impact of its policies on the economy.

  APNews

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