If you have recently been writing a wedding speech or tried to answer a difficult Excel question or maybe summarizing a large chunk of text, chances are you’ve engaged with ChatGPT in some form. There’s a lot AI is great at, and helping with admin is one of them!

Leveraging AI to make ‘industry’ more efficient is a growing theme. In fact, it was referenced specifically in the Spring Budget. The Chancellor committed £3.4bn to the healthcare sector.

What was of interest wasn’t the figure, it was where it was being directed. This money is to be spent on digital transformation – including the expansion of AI capabilities for diagnosis, and lots of digitization of tasks.According to the UK government, “this funding will significantly reduce the 13 million hours of time doctors spend on poor IT, freeing up significant capacity (…)”.  Informed people will run the rule over the accuracy of these numbers, but the theme is an interesting one.

If we look to data away from our shores to make this more objective – then it would appear that there are some striking changes that have occurred over the past few decades.

In the U.S. the number of doctors has doubled since the 1970s, but interestingly the number of admin staff has grown 30 times!

Reports of unreadable, disjointed medical records, and lots of complex, labour-intensive insurance processes mean more people are needed to deal with admin than treat patients. And it’s expensive! But the positive is that technology is already having a tremendous impact elsewhere in the world of healthcare:

If AI can help in the less glamourous area of reducing the admin burden, the posiives could be material. For an ageing population, for workers within the sector… and for investors in it!
Intel co-founder Gordon Moore predicted a doubling of transistors every year for the next 10 years in his original paper published in 1965. Moore’s Law is the observation that the number of transistors on an integrated circuit will double every two years with minimal rise in cost.

Even though the price of energy contributed to the tightening of belts over the past couple of years, we still have it pretty good compared to our ancestors. Back in the 1600s, something that we now for granted – artificial light – would have cost you £16,000! imagine having to account for lighting as a percentage of expenditure in your budget? A lot has changed since then, your home is now probably devoid of candles, unless you are going for the atmosphere. Not only has the price of lighting changed, but also the technology that produces it.
Indeed, by 2006, the price for lighting in the UK had fallen to just £2.89:

Source: Fouquet and Pearson (2012), taken from ourworldindata.org. The price per million lumen-hours in £. 1 lumen-hour is equal to the luminous energy emitted in 1hr by a light source emitting 1 lumen. For comparison, a 100w light bulb emits around 1700 lumen.

Demand, efficiency, and innovation! When there is a desire for something, humans have an amazing ability to solve it. In this case, town gas allowed cheaper lighting in the 1800s, as gas lamps were twice as efficient as tallow candles. When the efficiency of the technology improves, the price of the service falls; gas lamps improved so much that during 1800 and 1900, the price of lighting reduced 30-fold! * You can really see this drop in the purple line above.
Electric lighting only became cheaper than gas lighting in the 1920s, (over 40 years after the introduction of the incandescent bulb). Consumption then kicked on and the rest is history. This is a nice way of looking at the evolution in lighting sources over time:

Commodities are attractive investments to many. You can touch them, they’re easily understood, and some of the short-term fluctuations do offer interesting investment opportunities. But over the long term?
As the lighting example proves, backing a commodity is effectively betting against human ingenuity. We prefer, over the long term, to back humankind’s proven track record of innovation. Will it shock you that a well-diversified portfolio is a good way to do that on aggregate….?

Despite basic living expenses remaining a primary concern, a recent survey reveals that the majority of individuals in the UK are optimistic about their financial prospects for the upcoming year.

According to Aegon, 52% of UK adults express a positive outlook on their finances for 2024, while 38% report feeling negative. Notably, those in the 50 to 59 age group, navigating the initial phase of their ‘Second 50,’ are less likely to feel positive, and a gender disparity exists, with females displaying less optimism compared to males.

Two years into the cost-of-living crisis, the survey underscores that ‘paying for basic living expenses’ continues to be the foremost priority for the coming year (37%). Additional financial priorities include building emergency savings (32%) and enjoying life (28%), although the latter has seen a decline from 34% in late 2021.

Almost half (49%) of the respondents in the survey believe that a decrease in inflation would boost their optimism, whereas only 6% anticipate increased pessimism, and 26% think their perspective would remain unchanged.

Steven Cameron, the pensions director at Aegon, noted, “As we step into 2024 and anticipate the coming year, our research indicates a resurgence in people’s confidence and optimism regarding their personal finances. Many attribute this to recent declines in inflation and the hope for further reductions.” Cameron also acknowledged the persistence of the cost-of-living crisis, emphasising that meeting basic living expenses remains the top priority for many individuals in managing their personal finances. Aegon pointed out that those on a fixed income, including numerous pensioners, are grappling with uncertain times, despite an 8.5% increase in the state pension from April. The sustainability of the triple lock guarantee, a topic of ongoing debate, adds to the uncertainty.

Cameron also highlighted this pressing issue, stating, “The elephant in the room remains whether the triple lock is sustainable long term. While the state pension serves as a lifeline for millions, it poses a significant cost for today’s workers funding it through their National Insurance. We urge all political parties to clarify their state pension intentions ahead of the General Election, as it could significantly influence voting preferences.”

Clear Financial maintains an optimistic outlook for 2024, anticipating that the upcoming year will bring positive developments.

The calendar year still governs much of what we think and do, even though it is a counting system formed roughly two millennia ago (with assistance from Pope Gregory XIII in 1582 to get the leap year calculation right).
Take for example, New Year’s Resolutions. A whole lot of them will be about getting fitter or healthier.
And so, at the start of every year, there are regular online searches for health-related terms (as you can see in the Google Trends chart below). You can also see the impact of COVID lockdowns in 2020 and 2021 – “gym” searches fell, but “exercise” searches shot up!

It is tempting to think that the calendar would be just as important for financial markets. There are, after all, various ‘calendar effects’ to get excited about – The Santa Rally, selling in May to name two.
At this time of year there is of course the January Effect. Allegedly if the market rises in the month of January, the year will be a positive one for markets. But, if the market falls in January, it will be a negative one for markets.So, have we therefore found a fool-proof way to beat the market? Wait until the end of January and then invest if the market is positive?!As you would expect, the answer is a definite NO!
As the following chart shows, the effect isn’t that common. The January Effect has occurred 17 times in the UK FTSE 100 in the past 30 years (the bars with a black outline n the chart below). That s only just over half the time, so might as well toss a coin!

• First – some great years would be missed due to a bad January. For example, in 2021 the FTSE lost 1% in January, but then was up 18% over the course of 12 months. 1995,2003,2009,2010,2016 and 2017 were similar.
• Second- even if you DO invest, you miss out on January’s return while you wait to see what happens! You only get 11 months of return on the years you are right. An example of this is in 2023. The FTSE rose 4% in January but 8% over the year, so waiting meant missing out on half the return.

The below chart shows the price of three European shares going back 10 years.

Playing your (investment cards) right

Take a deck of cards, turn one over, and then predict whether the next card will be higher or lower than the first one.

If the first card is a two its obviously higher, if the first card is an ace it’s lower. In the middle, although it’s a lot harder you can make a pretty good guess, particularly if you know what’s been played already.
When investing, it can be tempting to think that the same principles can apply. When an asset class has performed exceptionally well (higher), it can feel like it’s extremely unlikely to do well again (lower).
In 2022 Commodities were the best performing asset class, and in 2023 the worst! But most of the time, that’s not how the market works.

In 2016, Emerging Market equities were by far and away the top performer, so it was suggested that the next year wouldn’t be so strong – but it turns out they were wrong! Emerging Market equities aced it again in 2017, this trounced all other asset classes in terms of performance.

The same happens on the other side of the scale. Commodities were the worst performer in 2014, (minus 17%) and although it was hoped they would bounce back they performed even more poorly in 2015 (minus 24%)!

The problem with applying the logic of “Higher or Lower” to investing is one of knowledge. In a game of cards, we know what the top and bottom of the pack are and how many cards there are in a deck. The information is there and it’s useful.
But an asset class, even if it’s already at the bottom, can always go lower, or higher if it’s at the top! It doesn’t matter what happened before.

The first state lottery took place in England on this day in 1569. It was introduced by Elizabeth I to raise money to strengthen coastal defences vulnerable to Spanish invasion. First prize was a huge £5,000 paid in ‘ready money’, plate, tapestries and cloth. It wasn’t a success, however.Tickets were ten shillings each, too expensive for most people, and the whole enterprise was regarded with suspicion. Subsequent lotteries proved more popular, and helped to fund the building of Westminster Bridge in the 1730s and the British Museum in the 1750s. But, as gambling increased across the country, the lottery eventually came to be seen as a great moral evil and was stopped in 1826 never to be introduced again, until it was.

The chances of winning the lottery are 1 in 45,057,474, or, to express this probability in a non-mathematical way, quite slim.Statically, being crushed to death by a vending machine is a far more likely occurrence – particularly for me, as I use vending machines a lot and I’ve never bought a lottery ticket.