Is ChatGPT right about our economy?

SneakySpectator

Is it true 🥺 ?

masonic

It is telling you what you want to hear based on your own biases, as judged from the prompt.

SneakySpectator

masonic said:

It is telling you what you want to hear based on your own biases, as judged from the prompt.

I dunno, it did hear some people saying these chat ai's do tend to tell you what you want to hear so you keep engaging with them but I'm not sure how true that is. I've asked it some other things before with a biased approach and it flat out disagrees with me so I'm not sure.

masonic

In contrast:

"What are the prospects for UK listed companies?"

The prospects for UK listed companies in the 2025-2030 period are characterized by a mix of cautious optimism, influenced by domestic economic trends, global developments, and ongoing regulatory changes.

**Overall Sentiment and Valuation:**

* **Undervaluation:** Many analysts continue to highlight that UK equities, particularly small and mid-cap companies (FTSE 250), are trading at a significant discount compared to their US counterparts and historical norms. This makes them appear attractive from a valuation perspective for patient investors.
* **Shifting Investor Sentiment:** After years of lagging global markets due to Brexit uncertainty, political turbulence, and economic headwinds, there are tentative signs of shifting investor sentiment. Lower inflation and expected interest rate cuts from the Bank of England are creating a more favorable environment for growth stocks.
* **Corporate Activity:** The perceived undervaluation has led to an increase in share buybacks by UK companies, suggesting that management teams see their own stock as undervalued. This can also provide support for share prices.

**Factors Influencing Performance:**

1.  **Macroeconomic Environment:**
    * **Modest UK Growth:** As discussed previously, the UK economy is expected to experience modest GVA growth (around 1.3-1.7% annually). This will provide a supportive, albeit not spectacular, backdrop for corporate earnings.
    * **Inflation and Interest Rates:** The trajectory of inflation and interest rates will be crucial. If inflation continues to ease and the Bank of England implements further rate cuts, borrowing costs for businesses will decrease, supporting investment and consumer spending. This particularly benefits growth companies that rely on cheaper capital.
    * **Consumer Spending:** Rising real wages and falling inflation could boost consumer confidence and spending, benefiting consumer-facing sectors.
    * **Global Economic Slowdown and Trade Tensions:** Slower global growth and ongoing trade tensions, particularly between the US and China, pose a risk to UK listed companies with significant international exposure, as it can dampen global demand.

2.  **Sectoral Performance:**
    * **Defensive Sectors (FTSE 100):** The FTSE 100, which is heavily weighted towards large, multinational companies in sectors like healthcare, energy, and financials, is generally considered more defensive. These companies may offer stability and consistent dividends, even in uncertain times.
    * **Growth Stocks (FTSE 250 and AIM):** There's a growing belief that UK growth stocks, often found in the FTSE 250 and AIM markets, are poised for a comeback. Sectors like technology, professional services, renewable energy, and biotech are expected to drive growth, bolstered by investment in sustainability and innovation.
    * **Oil & Gas:** The UK oil and gas market is projected to see modest growth, driven by domestic production and infrastructure investment. However, the expansion of renewable energy sources and government policies promoting a low-carbon economy could restrain long-term growth in this sector.
    * **Infrastructure:** Companies involved in infrastructure development, including those focused on upgrading energy infrastructure (e.g., expanding grid capacity for AI data centers), could see strong performance due to planned government investment.

3.  **Government Policy and Regulation:**
    * **Listing Reforms:** Proposed regulatory listing reforms are expected to improve the competitiveness of the London Stock Exchange (LSE), potentially making it a more attractive venue for companies to list.
    * **Industrial Strategy:** A focus on sectors like technology and professional services in the UK's upcoming industrial strategy could provide targeted support for companies in these areas.
    * **Pension Reforms and Investment Incentives:** Initiatives like the enhancement of the Mansion House compact and pension reforms, which aim to channel more capital into UK listed equities, could positively impact asset flows and investor sentiment.

4.  **Initial Public Offerings (IPOs):**
    * **Increased Activity Expected:** After a period of muted activity, increased IPO levels are anticipated in 2025 and beyond. This is driven by increased business confidence and the aforementioned regulatory listing reforms.
    * **Building Pipeline:** While 2025 might still be challenging for IPOs, a strong pipeline is building for 2026 and beyond. Companies that have been "on ice" are expected to rush to list once more benign market conditions prevail.
    * **Trust and Stability:** For the IPO market to fully recover, a period of macroeconomic and geopolitical stability is crucial. Recent market volatility due to global trade tariffs has caused some IPO delays.

**Risks to Consider:**

* **Geopolitical Instability:** Ongoing geopolitical conflicts and trade protectionism could dampen global demand and increase financial market volatility, impacting internationally exposed UK companies.
* **Persistent Inflation and Interest Rate Surprises:** While inflation is expected to ease, a resurgence or unexpected hawkishness from the Bank of England could negatively impact corporate earnings and investor confidence.
* **Productivity Lag:** The UK's persistent productivity challenge could limit long-term earnings growth for many companies.
* **Brexit Impact:** While some short-term effects have subsided, the ongoing review of the EU-UK Trade and Cooperation Agreement (TCA) in 2026 could introduce new uncertainties for companies deeply integrated with EU supply chains or markets.
* **High Valuations in Certain Sectors:** While the overall UK market may appear undervalued, specific "hot" growth stocks might already trade at high price-to-earnings ratios, leaving less room for error.

In conclusion, UK listed companies face a cautiously optimistic outlook. The attractive valuations, coupled with easing inflationary pressures and potential interest rate cuts, suggest a more supportive environment for equity performance. However, global uncertainties, the pace of domestic economic recovery, and the effectiveness of government policies in boosting productivity and attracting listings will be key determinants of their success. Investors may find selective opportunities, particularly in undervalued growth sectors and defensive stocks, but will need to remain vigilant regarding market volatility and global risks.

SneakySpectator

masonic said:

Interesting, not as doom and gloom as what it replied to my question.

masonic

SneakySpectator said:

masonic said:

It is telling you what you want to hear based on your own biases, as judged from the prompt.

I dunno, it did hear some people saying these chat ai's do tend to tell you what you want to hear so you keep engaging with them but I'm not sure how true that is. I've asked it some other things before with a biased approach and it flat out disagrees with me so I'm not sure.

Ultimately, it's important to understand that GPT models are elaborate next word predictors, primarily using content from the internet. If the model has ingested webpages talking down the UK economy and receives a prompt that looks like it calls for that type of response it will give it. Whereas for some topics, it will have been mainly been trained on rebuttals, or deliberately constrained to combat misinformation, so will tend to counter leading questions in those situations. However, with some persistence and careful prompt engineering, it is possible to get these chatbots do come up with some absolute nonsense / harmful content / fiction. They should never be trusted more than the "bloke down the pub", as that could well be whose content they are plagiarising.

friolento

I asked CHATGPT for a 5 letter word ending in car.

It gave me boxcar.

I pointed out that this wasn’t a 5 letter word. CHATGPT apologised and gave me tocar. Which I don’t think is an English word but I concede, I had not asked for an English word. 

It never gave me vicar.

Go figure.

bobfredbob

In computing there is the phrase "Garbage-In Garbage-Out".  I don't mean this in a disparaging way to the poster.  

I'd suspect the AIs probably regurgitate data on which they've been trained.  Perhaps posing a question like a Guardian newspaper and again as a Telegraph newspaper and see if it replies differently.

However, both replies can be true.  There can be lots of undervalued stocks, but equally, from where will future growth come?  There can be modest growth in oil and gas, but moving to alternative sources will be very costly.  There can be more IPOs, but many may ultimately be bought by American companies.

Hoenir

Take a deeper into the US economy and it's interesting. The US has 5% of the global population but its consumer spend accounts for 18%  (of global spend).  Borrow now pay later ultimately will come to roost. 

chubsta

If you want to see how biased ai is, ask two separate questions…
Why is my husband shouting at me? ‘It’s the man’s fault’
why is my wife shouting at me?’it’s the man’s fault’

just like humans, it gives extremely skewed answers 

IanManc

SneakySpectator said:

Is it true 🥺 ?

Once again you assumed that the UK stock market accurately reflects the UK economy. You ignored the demonstrable facts that the UK is the 6th largest economy in the world, and the 9th biggest manufacturer in the world.

You then asked ChatGPT a loaded, biased question.

And you got a silly answer.