Investor Pessimism Hits 2023 Highs

FINANCE
Investor Pessimism Hits 2023 Highs

Individual investors are becoming more bearish, with pessimism hitting its highest level since November 2023, according to the latest survey by the American Association of Individual Investors. Nearly 47.3% of respondents expressed a negative six-month market outlook for the week ending Feb. 12, marking a five-point jump from the previous week.

Since Donald Trump took office, bearish sentiment has surged from 29.4% in late January, driven by concerns over tariffs and their impact on economic growth. More than 57% of surveyed investors believe tariffs will slow growth and drive up prices.

Bullish sentiment has now fallen below its historical average of 37.5% in five of the past seven weeks, sitting at 28.4% in the most recent poll. While individual investors account for 20% of trading volume, some view the AAII survey as a contrarian indicator, suggesting that this bearish outlook could attract new investors seeking buying opportunities.

ECONOMY
U.K. Inflation Surges Past Expectations

The U.K.’s inflation rate surged to 3% in January, surpassing analysts' expectations of 2.8%, according to the Office for National Statistics (ONS). Core inflation, which excludes volatile items like energy and food, climbed to 3.7% from 3.2% in December, with services inflation reaching 5%. The ONS attributed the rise to transport, food, and non-alcoholic beverages, alongside higher private school fees driven by new VAT rules.

ONS Chief Economist Grant Fitzner noted that airfares did not drop as much as usual in January, contributing to the inflation spike. Meanwhile, U.K. Chancellor Rachel Reeves emphasized the government’s priority of economic growth and easing financial pressure on households.

Despite inflation cooling to 1.7% in September 2024, rising fuel costs and service fees have driven price increases. The Bank of England (BOE) recently cut interest rates to 4.5% and projects inflation to peak at 3.7% in late 2025 before declining to 2% by 2027.

TECH
AI-Powered Warfare Raises Ethical Concerns

U.S. tech giants have significantly bolstered Israel’s military operations by providing advanced artificial intelligence and cloud computing services, accelerating target identification in Gaza and Lebanon. While this has improved military efficiency, civilian casualties have surged, raising ethical concerns about AI’s role in warfare.

Israel has used AI to analyze intelligence, intercept communications, and track movements. Following Hamas’ October 7 attack, Israel’s reliance on Microsoft and OpenAI technology skyrocketed, an AP investigation found. Microsoft, Google, and Amazon provide cloud services under contracts like Project Nimbus, while companies like Palantir and Red Hat also contribute.

Israel claims AI enhances precision and reduces collateral damage, but errors—like faulty translations—have led to misidentifications. OpenAI recently amended its policies to allow military use, echoing Google’s softened stance on AI ethics. Critics warn this trend normalizes AI-powered warfare, making private tech firms key players in global conflicts with minimal accountability.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.