Artificial Intelligence
Inflation
Notes from the field
Innovations in artificial intelligence continue
Though attention remains centered on generative AI, the industry is evolving at such a head-spinning pace that the next major achievement could spring from any corner of the AI world. For example, there have been notable advances in Kolmogorov-Arnold Networks (KANs), a leaner alternative to the popular node-based neural networks used by chatbots like Chat GPT and Google’s Gemini 1.5. Also generating buzz: AI systems trained for text-based medical tasks, such as generating doctor referrals and summarizing patient records.
In Japan, the economic outlook looks slow and steady
It’s been a big year for Japan’s economy, which had been marked for decades by volatility. While a dramatic rebound is not anticipated, notable changes at both the cultural and economic levels continue to show promise: Labor shortages have prompted wage increases, businesses are improving operating efficiency and the population has grown more comfortable with inflation. Despite possible near-term headwinds, these changes seem to indicate gradual long-term growth ahead.
Inflation remains a drag on the middle class
The brightening inflation picture has yet to be felt by many low- and middle-income households. Though inflation is down significantly from its peak two years ago, the pronounced price hikes on everyday items such as food and gas have been hard for consumers to sidestep. That’s blunted the benefit of rising wages and yanked the savings rate below both its pre-pandemic and historical levels. Weak savings aren’t a problem at the moment, but they leave little cushion in household safety nets if the labor market were to wobble.
Opportunity in China’s car market
The competitive Chinese auto market is producing high-performing cars at affordable prices, creating potentially compelling investment opportunities. But not all manufacturers in the crowded field hold the same promise. Electric vehicle makers generally appear poised for growth as consumer demand stays strong. And related businesses such as battery makers stand to gain from an expected firming of lithium prices. The more promising companies tend to have solid export strategies and ample free cash flow that they’re passing along to investors.
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