There was a lot of news as we began the week.
First was a big election upset in Brazil leading to that country’s market having its worst open, I think ever, down around 25%. Prices improved but still closed down by around 20% for the day. Yikes.
We have another Fed meeting tomorrow but, as I type, the odds of a rate increase are less than 10%. Most investors assume the Fed will raise rates again but not until December, according to the CME Group’s FedWatch tool.
Here at home, markets are taking a breather after a volatile last week, with stocks opening higher and the yield on the 10yr Treasury back down to just under 5%. One of the reasons for the upsurge is news that Anthropic has formally announced plans to go public in the next month or so. The details are making headlines, and I’ll share those with you as more analysis becomes available.
Still, at this point most eyes seem focused on the midterms next week. A review of various polls shows that Democrats are expected to take control of the House and Senate, and more governorships seem to be in play for Dems as well. But that’s all a best guess by pollsters, and now prediction markets, who have spotty records even as recent as last week after getting it wrong in Brazil. So regardless of what some people say, every vote matters and ballots decide elections, not pollsters or people playing around on what are essentially gambling forums.
Shifting gears away from politics, the slipperiest of slopes, I wanted to pass along some snippets from a recent Wall Street Journal article about Schwab’s approach to AI agents, allowing access, and so forth. I know I’ve been bringing AI up a lot and not everyone reading this has accounts at Schwab, but it’s generally indicative of how brokerage firms and other financial institutions are handling third-party AI access at this point. Risk is potentially high, but so is opportunity. These AI tools are obviously new and much will change in the coming months, so I’ll try to keep you informed as best I can.
I also mention this because Schwab has been in the news with their new link to Anthropic’s Claude AI, and this has created some excitement but also anxiety with clients and at the market level. Ultimately, it’s helpful to know that Schwab is an innovative company but also extremely risk averse in some ways, and their stodginess can be a benefit when it comes to risking client data.
Anyway, here are some portions of the article I mentioned…
Rick Wurster says there is only so much that artificial-intelligence agents can do for Charles Schwab customers. Even when they are the closest of friends.
For Wurster, Schwab’s chief executive, this was no hypothetical; he recently met an older woman who described OpenAI’s ChatGPT as her best friend. She messages her digital companion all day, and even bids it good night. But when it comes time to make major money decisions, the customer picks up the phone to call her financial adviser at Schwab.
In relaying her story, Wurster sees the future of financial advice. Everyday Americans are finding ways to use AI tools to help manage their investments, from researching the market to deploying agents to buy stocks. But there are still some needs that the bots can’t fill. And that is where humans come in, Wurster said…
The rapid advancement of AI has upended countless assumptions about what tasks are best performed by people. AI agents have gained a foothold in financial services, as they have in most industries, leaving executives like Wurster to ponder how the technology can enhance parts of their businesses—and whether it poses a threat to others.
New agents such as Meta Platforms’ Muse have raised concerns that bots might soon move money, craft tax strategies or otherwise interfere with once-reliable revenue streams in the investment-advice business. Smaller brokerages are rushing to roll out AI-powered investing tools that can trade stocks, options and other assets on a customer’s behalf…
AI’s large language models are already making it easier to research the markets, boosting stock investments. And AI should play a growing role in dispensing financial guidance, even if the technology never fully replaces a human adviser, Wurster said. Schwab recently announced Charley, an AI assistant that can pull stock quotes, check balances and handle other basic tasks.
The brokerage has also allowed a small group of traders to connect Claude to their brokerage accounts and plans to make this capability more widely available in the coming months, Wurster said.
So-called agentic trading has swept the retail investing world in recent months. Leaders at smaller brokerage firms have described a potentially revolutionary shift that will allow individual traders to adopt automated, algorithmic strategies previously reserved for the pros—even directing a team of AI agents to play the markets for them while they work, sleep or otherwise go about their day. Robinhood Markets recently described the tools as a way to “put the power of hedge funds in every trader’s pocket.”…
Wurster noted that many of the firms pushing for agentic trading are those whose profits depend largely on the volume of customer trades. Such transaction revenue makes up a chunk of Schwab’s earnings, too, though the company also makes money on investment-fund fees, interest income and its wealth-management business.
These same rivals, he said, are also promoting yes-or-no bets on sports and pop-culture events as investing.
“Some of these are firms that describe gambling as an asset class,” he said. Wurster has previously expressed his opposition to the entertainment-focused prediction markets offered on some trading apps. “You’ve got to look behind that and ask: What is the incentive structure?”
That is not to say that Schwab isn’t building out more agentic capabilities. Eventually, Wurster said, Charley will be able to tackle any tasks that customers can currently execute themselves on Schwab’s website or app. But he plans to keep one key safeguard in place: Agents wouldn’t be fully autonomous and would only act on specific criteria set by the client.
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