Buy now, pay later firms like Klarna and Block’s Afterpay could be about to face tougher rules in the U.K.
Nikolas Kokovlis | Nurphoto | Getty Images
Financial technology firm Klarna is pushing deeper into banking with its own checking account-like product and a cashback offering that rewards users for shopping via its app.
The company — best known for its buy now, pay later loans that let consumers pay for purchases via interest-free monthly installments — said Thursday that it is launching the new products as it seeks to “disrupt retail banking” and encourage customers to move their spending and saving onto its platform.
“These new products make it easier for customers to manage multiple scheduled payments, helping our customers use Klarna for more frequent purchases and driving loyalty,” Sebastian Siemiatkowski, Klarna’s CEO and founder, told CNBC.
Siemiatkowski said that Klarna wants to “support all consumers with their everyday spending,” adding that the products will allow people to “earn money while they shop and manage it in a Klarna account.”
The two new products, which are being rolled out in 12 markets including the U.S. and across Europe, will show up in the Klarna app as “balance” and “cashback.”
Klarna balance lets users store money in a bank-like personal account, which they can then use to make instant purchases and pay off their buy now, pay later loans.
Users can also receive refunds for returned items directly in their Klarna balance.
Cashback offers customers the ability to earn up to 10% of the value of their purchases at participating retailers as rewards. Any money earned gets automatically stored in their balance account.
It’s not Klarna’s first foray into more traditional banking; the company has offered checking accounts and savings products in Germany since 2021.
Now, the company is expanding these banking products in other markets.
Customers in the EU — where Klarna has an official bank license — will be able to earn as much as 3.58% interest on their deposits. Customers in the U.S., however, will not be able to earn interest.
The launch marks a major step up in Klarna’s product range as the fintech giant edges closer toward a much-anticipated U.S. IPO.
Klarna has yet to set a fixed timeline for the stock market listing. However, in an interview with CNBC’s “Closing Bell” in February, Siemiatkowski said an IPO this year was “not impossible.”
“We still have a few steps and work ahead of ourselves,” he said. “But we’re keen on becoming a public company.”
In the meantime, Klarna is in discussions with investors about a secondary share sale to provide its employees with some liquidity, a person familiar with the matter told CNBC.
Klarna’s valuation on the open secondary market is currently in the high-teen billions, said the source, who was speaking on condition of anonymity as details of the share sale are not yet public.
Sergio Ermotti, chief executive officer of UBS Group
Stefan Wermuth | Bloomberg | Getty Images
ZURICH, Switzerland ꟷ UBS CEO Sergio Ermotti said Wednesday that market volatility could intensify in the second half of the year, but he does not believe the U.S. is heading into a recession.
Global equities saw sharp sell-offs last week as investors digested weak economic data out of the U.S. which raised fears about an economic downturn in the world’s largest economy. It also raised questions about whether the Federal Reserve needed to be less hawkish with its monetary policy stance. The central bank kept rates on hold in late July at a 23-year high.
When asked about the outlook for the U.S. economy, Ermotti said: “Not necessarily a recession, but definitely a slowdown is possible.”
“The macroeconomic indicators are not clear enough to talk about recessions, and actually, it’s probably premature. What we know is that the Fed has enough capacity to step in and support that, although it’s going to take time, whatever they do to be then transmitted into the economy,” the CEO told CNBC on Wednesday after the bank reported its second-quarter results.
UBS expects that the Federal Reserve will cut rates by at least 50 basis points this year. At the moment, traders are split between a 50 and a 25 basis point cut at the Fed’s next meeting in September, according to LSEG data.
Speaking to CNBC, Ermotti said that we are likely to see higher market volatility in the second half of the year, partially because of the U.S. election in November.
“That’s one factor, but also, if I look at the overall geopolitical picture, if I look at the macroeconomic picture, what we saw in the last couple of weeks in terms of volatility, which, in my point of view, is a clear sign of the fragility of some elements of the system, … one should expect definitely a higher degree of volatility,” he said.
Another uncertainty going forward is monetary policy and whether central banks will have to cut rates more aggressively to combat a slowdown in the economy. In Switzerland, where UBS is headquartered, the central bank has cut rates twice this year. The European Central Bank and the Bank of England have both announced one cut so far.
“Knowing the events which are the unknowns on the horizon like the U.S. presidential election, we became complacent with a very low volatility, now we are shifting to a more normal regime,” Bruno Verstraete, founder of Lakefield Wealth Management told CNBC Wednesday.
“In the context of UBS, [more volatility is] not necessarily a bad thing, because more volatility means more trading income,” he added.
Mark Carnegie, founding partner of M.H. Carnegie & Co, told CNBC that Japanese regional banks could face a situation worse than the 2023 U.S. banking crisis.
The momentum in Japan markets were largely driven by the country’s technology and financial sector.
Doctoregg | Moment | Getty Images
Japan’s major indexes gained more than 2% on Tuesday as markets resumed trading after a holiday.
The benchmark Nikkei 225 jumped 2.72% higher and breached 36,000 for the first time since Aug. 2. The broader Topix gained 2.25%.
The momentum was largely driven by the country’s technology and financial sectors, with Rakuten Group and Trend Micro leaping more than 8% and 6%, respectively.
The country’s parliament plans to hold a special session next week to discuss the Bank of Japan’s decision to raise interest rates last month, Reuters reported, citing government sources.
South Korea’s Kospi dipped 0.2%, while the small-cap Kosdaq lost 1.57%.
Wages in Australia rose 0.8% in the quarter ended June, the slowest pace since the same quarter a year earlier, compared with estimates of a 0.9% rise. Wages rose 4.1% on an annual basis.
Hong Kong’s Hang Seng index kicked off the trading day with a 0.4% gain, while mainland China’s CSI 300 opened 0.06% higher.
In Southeast Asia, Singapore reported its economy grew 2.9% in the second quarter from a year ago, in line with the advance gross domestic product estimate released in July. The Ministry of Trade and Industry cited strength in the wholesale trade, finance and insurance as well as the information and communication sectors. The city-state also said it sees 2024 GDP growth of 2% to 3%, versus its previous forecast of 1% to 3%.
U.S. markets grappled with a choppy session overnight as investors braced for key inflation data.
The S&P 500 concluded the day flat at 5,344.39, while the tech-heavy Nasdaq Composite climbed 0.21% to close at 16,780.61, led by shares of Nvidia soaring 4%. On the flipside, the Dow Jones Industrial Average fell 140 points or 0.36% to conclude at 39,357.01.
Traders await Wednesday’s consumer price index for July, a key indicator of the health of the U.S. economy. Investors will analyze the data for indications the Federal Reserve can begin cutting rates in September.
—CNBC’s Brian Evans and Tanaya Macheel contributed to this report.
Chris Gorman, KeyCorp CEO, joins 'Money Movers' to discuss Scotiabank's stake in Keycorp, how Keycorp was able to get the financing it did, and what Scotiabank is getting out of the deal.
JPMorgan Chase has rolled out a generative artificial intelligence assistant to tens of thousands of its employees in recent weeks, the initial phase of a broader plan to inject the technology throughout the sprawling financial giant.
The program, called LLM Suite, is already available to more than 60,000 employees, helping them with tasks like writing emails and reports. The software is expected to eventually be as ubiquitous within the bank as the videoconferencing program Zoom, people with knowledge of the plans told CNBC.
Rather than developing its own AI models, JPMorgan designed LLM Suite to be a portal that allows users to tap external large language models — the complex programs underpinning generative AI tools — and launched it with ChatGPT maker OpenAI’s LLM, said the people.
“Ultimately, we’d like to be able to move pretty fluidly across models depending on the use cases,” Teresa Heitsenrether, JPMorgan’s chief data and analytics officer, said in an interview. “The plan is not to be beholden to any one model provider.”
Teresa Heitsenrether is the firm’s chief data and analytics officer.
Courtesy: Joe Vericker | PhotoBureau
The move by JPMorgan, the largest U.S. bank by assets, shows how quickly generative AI has swept through American corporations since the arrival of ChatGPT in late 2022. Rival bank Morgan Stanley has already released a pair of OpenAI-powered tools for its financial advisors. And consumer tech giant Apple said in June that it was integrating OpenAI models into the operating system of hundreds of millions of its consumer devices, vastly expanding its reach.
The technology — hailed by some as the “Cognitive Revolution” in which tasks formerly done by knowledge workers will be automated — could be as important as the advent of electricity, the printing press and the internet, JPMorgan CEO Jamie Dimon said in April.
It will likely “augment virtually every job” at the bank, Dimon said. JPMorgan had about 313,000 employees as of June.
The bank is giving employees what is essentially OpenAI’s ChatGPT in a JPMorgan-approved wrapper more than a year after it restricted employees from using ChatGPT. That’s because JPMorgan didn’t want to expose its data to external providers, Heitsenrether said.
“Since our data is a key differentiator, we don’t want it being used to train the model,” she said. “We’ve implemented it in a way that we can leverage the model while still keeping our data protected.”
The bank has introduced LLM Suite broadly across the company, with groups using it in JPMorgan’s consumer division, investment bank, and asset and wealth management business, the people said. It can help employees with writing, summarizing lengthy documents, problem solving using Excel, and generating ideas.
But getting it on employees’ desktops is just the first step, according to Heitsenrether, who was promoted in 2023 to lead the bank’s adoption of the red-hot technology.
“You have to teach people how to do prompt engineering that is relevant for their domain to show them what it can actually do,” Heitsenrether said. “The more people get deep into it and unlock what it’s good at and what it’s not, the more we’re starting to see the ideas really flourishing.”
The bank’s engineers can also use LLM Suite to incorporate functions from external AI models directly into their programs, she said.
JPMorgan has been working on traditional AI and machine learning for more than a decade, but the arrival of ChatGPT forced it to pivot.
Traditional, or narrow, AI performs specific tasks involving pattern recognition, like making predictions based on historical data. Generative AI is more advanced, however, and trains models on vast data sets with the goal of pattern creation, which is how human-sounding text or realistic images are formed.
The number of uses for generative AI are “exponentially bigger” than previous technology because of how flexible LLMs are, Heitsenrether said.
The bank is testing many cases for both forms of AI and has already put a few into production.
JPMorgan is using generative AI to create marketing content for social media channels, map out itineraries for clients of the travel agency it acquired in 2022 and summarize meetings for financial advisors, she said.
The consumer bank uses AI to determine where to place new branches and ATMs by ingesting satellite images and in call centers to help service personnel quickly find answers, Heitsenrether said.
In the firm’s global-payments business, which moves more than $8 trillion around the world daily, AI helps prevent hundreds of millions of dollars in fraud, she said.
But the bank is being more cautious with generative AI that directly touches upon the individual customer because of the risk that a chatbot gives bad information, Heitsenrether said.
Ultimately, the generative AI field may develop into “five or six big foundational models” that dominate the market, she said.
The bank is testing LLMs from U.S. tech giants as well as open source models to onboard to its portal next, said the people, who declined to be identified speaking about the bank’s AI strategy.
Heitsenrether charted out three stages for the evolution of generative AI at JPMorgan.
The first is simply making the models available to workers; the second involves adding proprietary JPMorgan data to help boost employee productivity, which is the stage that has just begun at the company.
The third is a larger leap that would unlock far greater productivity gains, which is when generative AI is powerful enough to operate as autonomous agents that perform complex multistep tasks. That would make rank-and-file employees more like managers with AI assistants at their command.
The technology will likely empower some workers while displacing others, changing the composition of the industry in ways that are hard to predict.
Banking jobs are the most prone to automation of all industries, including technology, health care and retail, according to consulting firm Accenture. AI could boost the sector’s profits by $170 billion in just four years, Citigroup analysts said.
People should consider generative AI “like an assistant that takes away the more mundane things that we would all like to not do, where it can just give you the answer without grinding through the spreadsheets,” Heitsenrether said.
“You can focus on the higher-value work,” she said.
— CNBC’s Leslie Picker contributed to this report.
JPMorgan Chase CEO Jamie Dimon said Wednesday he still believes that the odds of a “soft landing” for the U.S. economy are around 35% to 40%, making recession the most likely scenario in his mind.
When CNBC’s Leslie Picker asked Dimon if he had changed his view from February that markets were too optimistic on recession risks, he said the odds were “about the same” as his earlier call.
“There’s a lot of uncertainty out there,” Dimon said. “I’ve always pointed to geopolitics, housing, the deficits, the spending, the quantitative tightening, the elections, all these things cause some consternation in markets.”
Dimon, leader of the biggest U.S. bank by assets and one of the most respected voices on Wall Street, has warned of an economic “hurricane” since 2022. But the economy has held up better than he expected, and Dimon said Wednesday that while credit-card borrower defaults are rising, America is not in a recession right now.
Dimon added he is “a little bit of a skeptic” that the Federal Reserve can bring inflation down to its 2% target because of future spending on the green economy and military.
“There’s always a large range of outcomes,” Dimon said. “I’m fully optimistic that if we have a mild recession, even a harder one, we would be okay. Of course, I’m very sympathetic to people who lose their jobs. You don’t want a hard landing.”
Macrae Sykes, Gabelli Funds portfolio manager, joins 'Squawk Box' to discuss the latest market trends, state of the banking sector, impact of the market sell-off, and more.
LONDON — European markets fell sharply at the start of the new trading week, though pared losses towards the end of the session amid a global stock sell-off.
The regional Stoxx 600 index closed 2.17% lower, pulling back from declines of more than 3% as the technology sector clawed back some ground to end 0.9% lower.
All sectors and major bourses nonetheless finished in the red, with utilities and oil and gas stocks both losing over 3%.
Strategists pointed to several causes for the downturn across Europe, Asia and the U.S. which began last week, including fears of a U.S. recession and rapid Federal Reserve Rate cuts, the recent hawkish pivot by the Bank of Japan and crash in the yen “carry trade,” and an ongoing re-rating of the tech sector.
The VIX, a measure of expected market volatility, jumped more than 100% to 64.06 during Monday trade before cooling to around 35, still its highest level since 2020.
U.S. stocks saw steep losses through the morning, with the Dow Jones Industrial Average losing nearly 1,000 points, or 2.5%, as the tech-heavy Nasdaq Composite fell 2.6%.
Asia-Pacific markets had led the sell-off on Monday. Japan stocks entered a bear market, with the Nikkei 225 losing 12.4% to log its worst day since 1987.
The broad-based Topix also saw a rout, tumbling 12.23%, while heavyweight trading houses such as Mitsubishi, Mitsui and Co., Sumitomo and Marubeni all plunged more than 14%.
The yen, meanwhile, rose to its highest level against the dollar since January as U.S. Treasurys gained.
On the data front, demand for U.K. services rose in July, increasing to 52.5 from 52.1 the previous month, fresh purchasing managers’ index data showed Monday. Corresponding data for Italy and Spain also pointed to sustained growth in the sector but at a slower pace than previous months.
Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Monday’s key moments. U.S. stocks plunged Monday on mounting recession fears following last week’s disappointing July jobs report. The Dow Jones Industrial Average and the S & P 500 are down 2.6% and 3.1%, respectively, in early morning trading. Jim Cramer said the market’s decline has been accelerated by the unwinding of the “carry trade,” a popular strategy where investors borrow in a currency with low interest rates, such as the Japanese yen, and invest in higher-yielding assets elsewhere. So as the Japanese yen jumped to its highest level in over seven months against the dollar on Monday, investors aggressively unwound these trades. Major portfolio laggards include Big Tech names like Apple. Shares are down 4.7% after Warren Buffett’s Berkshire Hathaway disclosed over the weekend that it dumped half its stake in the iPhone maker during the last quarter. If Buffett didn’t sell, “that stock would probably be up today,” Jim said, citing the company’s solid quarterly earnings report last Thursday. We’re not concerned about the news. The stock still has plenty of catalysts such as an upgrade cycle on its forthcoming artificial intelligence-integrated iPhone. Despite the market’s turmoil, Jim argued that there’s plenty of buying opportunities for investors right now. “You want to buy things that are not in the blast zone,” Jim said, including banks like Wells Fargo. “Wells is probably the most attractive stock we can buy right now.” We bought shares of Wells on Monday’s dip because of its great dividend yield and long-term growth prospects. Wells was one of six trades the Club executed to start the week. (Jim Cramer’s Charitable Trust is long AAPL, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Warren Buffett walks the floor and meets with Berkshire Hathaway shareholders ahead of their annual meeting in Omaha, Nebraska on May 3rd, 2024.
David A. Grogan
Warren Buffett’s Berkshire Hathaway dumped nearly half of its gigantic Apple stake last quarter in a surprising move for the famously long-term-focused investor.
The Omaha-based conglomerate disclosed in its earnings filing that its holding in the iPhone maker was valued at $84.2 billion at the end of the second quarter, suggesting that the Oracle of Omaha offloaded a little more than 49% of the tech stake. Even after the selling Apple remains the largest stock stake by far for Berkshire.
The Apple share sale comes amid a broader pattern of selling by Buffett in the second quarter as Berkshire unloaded more than $75 billion in equities in the period, raising the conglomerate’s cash fortress to a record $277 billion.
Buffett had trimmed the Apple stake by 13% in the first quarter and hinted at the Berkshire annual meeting in May that it was for tax reasons. Buffett noted that selling “a little Apple” this year would benefit Berkshire shareholders in the long run if the tax on capital gains is raised down the road by a U.S. government wanting to plug a climbing fiscal deficit.
But the magnitude of this selling suggests it could be more than just a tax-saving move.
After declining in the first quarter on concerns it was falling behind on artificial intelligence innovation, Apple shares took off in the second quarter, gaining 23% to a new record as it gave more detail to investors about its future in artificial intelligence.
It won’t be clear exactly why Buffett is selling down the holding Berkshire first bought more than eight years ago, whether company reasons, market valuation or because of portfolio management concerns (Buffett typically doesn’t want a single holding to grow too large). Berkshire’s Apple holding was once so big that it took up half of its equity portfolio.
Apple
The 93-year-old investor largely avoided technology companies for most of his career before Apple. Berkshire began buying the stock in 2016 under the influence of Buffett’s investing lieutenants Ted Weschler and Todd Combs. Over the years, Buffett grew so fond of Apple that he increased the stake drastically to make it Berkshire’s biggest and called the tech giant the second-most important business after his cluster of insurers.
Buffett has been on a bit of a selling spree as of late with his top holdings. Buffett recently starting downsizing his second biggest stake — Bank of America, shedding $3.8 billion worth of the bank shares after a 12-day selling spree.
Overall, the quarterly report showed Buffett dumping stock last quarter, which saw the S&P 500 rise to a record in anticipation of a “soft landing” for the U.S. economy. That soft landing was called into question this week with Friday’s weaker-than-expected July jobs report.
Ukrainian soldiers fire D-30 artillery in the direction of Toretsk, Ukraine, on July 30, 2024.
Anadolu | Anadolu | Getty Images
Ukraine’s military said on Saturday it had attacked Russia’s Morozovsk airfield and a number of oil depots and fuel storage facilities in three Russian regions overnight.
The attack on the airfield hit an ammunition depot where Russian forces stored guided aerial bombs among other equipment, the military said.
“Russian combat aviation must be destroyed wherever it is, by all effective means. It is also quite fair to strike at Russian airfields. And we need this joint solution with our partners – a security solution,” Ukrainian President Volodymyr Zelenskiy wrote on the Telegram messaging app.
The Ukrainian president has repeatedly called on his Western allies for permission to use their weapons for long-range attacks on Russia, in addition to striking military targets close to the border.
He said on Saturday that Russian forces had used over 600 guided aerial bombs to attack Ukraine in the past week.
The attack on oil depots and fuel and lubricant storage facilities in Belgorod, Kursk and Rostov regions set fire to at least two oil tanks, according to the Ukrainian military report.
In Russia, local officials reported that tanks at a fuel storage depot in the Kamensky district of Rostov region caught fire as a result of a drone attack.
The regional governor of Belgorod also said Ukraine-launched drones caused a fire at an oil storage depot there, adding that the fire was extinguished and no one was injured.
Ukraine has dramatically stepped up its use of long-range drones this year to attack Russian oil facilities, attempting to damage sites fueling Russian forces and the country’s economy in Moscow’s 29-month-old invasion.
Morgan Stanley on Friday told its army of financial advisors that it will soon allow them to offer bitcoin ETFs to some clients, a first among major Wall Street banks, CNBC has learned.
The firm’s 15,000 or so financial advisors can solicit eligible clients to purchase shares of two exchange-traded bitcoin funds starting Wednesday, according to people with knowledge of the policy.
The move from Morgan Stanley, one of the world’s largest wealth management firms, is the latest sign of the adoption of bitcoin by mainstream finance. In January, the U.S. Securities and Exchange Commission approved applications for 11 spot bitcoin ETFs, heralding the arrival of an investment vehicle for bitcoin that is easier to access, cheaper to own and more readily traded.
So it’s not surprising that Wall Street’s major wealth management businesses didn’t immediately embrace the new ETFs, forbidding their financial advisors from pitching them and only allowing trades if clients actively sought out the product.
Morgan Stanley made the move in response to demand from clients and in an attempt to follow an evolving marketplace for digital assets, said the people, who declined to be identified speaking about the bank’s internal policies.
The bank is still striking a note of caution, however, in the rollout: Only clients with a net worth of at least $1.5 million, an aggressive risk tolerance and the desire to make speculative investments are suitable for bitcoin ETF solicitation, said the people. The investments are for taxable brokerage accounts, not retirement accounts, they added.
The bank will monitor clients’ crypto holdings to make sure they don’t end up with excessive exposure to the volatile asset class, according to the sources.
The only crypto investments approved for solicited purchase at Morgan Stanley are the pair of bitcoin ETFs from BlackRock and Fidelity; private funds from Galaxy and FS NYDIG that the bank made available starting in 2021 were phased out earlier this year.
Morgan Stanley is watching how the market for newly approved ether ETFs develops and hasn’t committed to whether it would provide access to those, the people said.
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Correction: Private funds from Galaxy and FS NYDIG that Morgan Stanley made available starting in 2021 were phased out earlier this year. An earlier version of this story included inaccurate information from Morgan Stanley sources about the company’s crypto investment offerings.
An electronic stock board displayed inside the Kabuto One building in Tokyo, Japan, on Thursday, June 27, 2024.
Bloomberg | Bloomberg | Getty Images
Japan’s Nikkei 225 nosedived almost 5% on Friday, with most Asia-Pacific markets lower after a sell-off on Wall Street overnight.
The Nikkei extended its 2.62% slide on Thursday to lead losses in the region and reach its lowest level since February. The Topix also plunged more than 5%.
Some heavyweight names that are seeing losses include Softbank Group, which tumbled over 7%. Trading houses Mitsui and Marubeni saw losses of over 9% and 7%, respectively.
Japanese government bond yields fell, with the yield on the benchmark 10-year JGB falling below the 1% mark and hitting it lowest level since June 20.
South Korea’s Kospi tumbled 2.6%, while the small-cap Kosdaq plunged 2.56%.
However, K-pop stocks were a bright spot for the market. Shares of three of the four listed K-pop companies defied the broader sell-off to climb on Friday, led by Hybe after the firm announced its new business strategy on Thursday after market hours.
Australia’s S&P/ASX 200 was down 2.02% , retreating from its all-time high achieved on Thursday.
Hong Kong’s Hang Seng index futures were at 17,047, lower than the HSI’s last close of 17,304.96.
Separately, South Korea’s inflation numbers for July came in slightly higher than expected, with the country’s consumer price index climbing 2.6% year on year, compared to the 2.5% expected by economists polled by Reuters.
The gloomy sentiment in Asia markets comes after a sell-off on Wall Street in Thursday’s trading session, which saw all three major U.S. indexes plunge on recession fears.
The Russell 2000 index, the small-cap benchmark that has rallied lately, dropped 3%.
In the U.S., fresh data stoked fears over a possible recession and apprehensions that the Federal Reserve could be too late in cutting interest rates.
Initial jobless claims rose the most since August 2023. The ISM manufacturing index, a barometer of factory activity in the U.S., came in at 46.8%, worse than expected and signaling economic contraction.
After these data, the 10-year Treasury yield dropped below 4% for the first time since February.
—CNBC’s Pia Singh and Samantha Subin contributed to this report.
AI-generated responses are becoming more common, whether travelers know or not.
Westend61 | Getty Images
An automated financial advisor called PortfolioPilot has quickly gained $20 billion in assets in a possible preview of how disruptive artificial intelligence could be for the wealth management industry.
The service has added more than 22,000 users since its launch two years ago, according to Alexander Harmsen, co-founder of Global Predictions, which launched the product.
The San Francisco-based startup raised $2 million this month from investors including Morado Ventures and the NEA Angel Fund to fund its growth, CNBC has learned.
The world’s largest wealth management firms have rushed to implement generative AI after the arrival of OpenAI’s ChatGPT, rolling out services that augment human financial advisors with meeting assistants and chatbots. But the wealth management industry has long feared a future where human advisors are no longer necessary, and that possibility seems closer with generative AI, which uses large language models to create human-sounding responses to questions.
Still, the advisor-led wealth management space, with giants including Morgan Stanley and Bank of America, has grown over the past decade even amid the advent of robo-advisors like Betterment and Wealthfront. At Morgan Stanley, for instance, advisors manage $4.4 trillion in assets, far more than the $1.2 trillion managed in its self-directed channel.
Many providers, whether human or robo-advisor, end up putting clients into similar portfolios, said Harmsen, 32, who previously cofounded an autonomous drone software company called Iris Automation.
“People are fed up with cookie-cutter portfolios,” Harmsen told CNBC. “They really want opinionated insights; they want personalized recommendations. If we think about next-generation advice, I think it’s truly personalized, and you get to control how involved you are.”
The startup uses generative AI models from OpenAI, Anthropic and Meta’s Llama, meshing it with machine learning algorithms and traditional finance models for more than a dozen purposes throughout the product, including for forecasting and assessing user portfolios, Harmsen said.
When it comes to evaluating portfolios, Global Predictions focuses on three main factors: whether investment risk levels match the user’s tolerance; risk-adjusted returns; and resilience against sharp declines, he said.
Users can get a report card-style grade of their portfolio by connecting their investment accounts or manually inputting their stakes into the service, which is free; a $29 per month “Gold” account adds personalized investment recommendations and an AI assistant.
“We will give you very specific financial advice, we will tell you to buy this stock, or ‘Here’s a mutual fund that you’re paying too much in fees for, replace it with this,'” Harmsen said.
“It could be simple stuff like that, or it could be much more complicated advice, like, ‘You’re overexposed to changing inflation conditions, maybe you should consider adding some commodities exposure,'” he added.
Global Predictions targets people with between $100,000 and $5 million in assets — in other words, people with enough money to begin worrying about diversification and portfolio management, Harmsen said.
The median PortfolioPilot user has a $450,000 net worth, he said.
The startup doesn’t yet take custody of user funds; instead it gives paying customers detailed directions on how to best tailor their portfolios. While that has lowered the hurdle for users to get involved with the software, a future version could give the company more control over client money, Harmsen said.
“It’s likely that over the next year or two, we will build more and more automation and deeper integrations into these institutions, and maybe even a Gen 2 robo-advisor system that allows you to custody funds with us, and we’ll just execute the trades for you.”
Harmsen said he created the first version of PortfolioPilot a few years ago to manage his own newfound wealth after selling his first company.
He’d grown frustrated after meeting more than a dozen financial advisors and realizing that they were “basically just salespeople trying to give access to this fairly standard” approach, he said.
“It felt like a very real problem for me, because the only alternative I saw on the market was, you know, basically becoming a day trader and becoming my own portfolio manager,” Harmsen said.
“I wanted hedge fund-quality tools and ways to think about risk and downside protection, and portfolio management across all of my different accounts and the buckets of money in crypto and real estate,” he said.
So around the time he was starting a family and buying a home in San Francisco, he began coding a program that could manage his investments.
After realizing it could have a broader use, Harmsen began building a team for Global Predictions, including three former employees of Bridgewater Associates, the world’s largest hedge fund.
The company’s rise has attracted regulatory scrutiny; in March, the Securities and Exchange Commission accused Global Predictions of making misleading claims in 2023 on its website, including that it was the “first regulated AI financial advisor.” Global Predictions paid a $175,000 fine and changed its tagline as a result.
While today’s dominant providers have been rushing to implement AI, many will be left behind by the transition to fully automated advice, Harmsen predicted.
“The real key is you need to find a way to use AI and economic models and portfolio management models to generate advice automatically,” he said.
“I think that is such a huge jump for the traditional industry; it’s not incremental, it’s very black or white,” he said. “I don’t know what’s going to happen over the next 10 years, but I suspect there will be a massive shake up for traditional human financial advisors.”
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Market slides : The S & P 500 gave back earlier gains and fell throughout Tuesday afternoon, led lower by the mega-cap tech stocks. Ahead of the post-Fed meeting news conference Wednesday afternoon, when central bank chief Jerome Powell is expected to signal interest rate cuts are coming, the market continued to toss out stocks of companies that don’t need lower rates to beat and raise. Investors instead kept buying stocks of companies whose prospects get a lot better in a lower-rate environment. In an example of this dynamic, Club name Nvidia doesn’t need rate cuts to spur demand for its artificial intelligence GPUs, but lower rates could create a windfall for Stanley Black & Decker if lower mortgage rates reignite sales of older homes that need repairs and remodeling. Nvidia dropped 5% on Tuesday. Stanley Black & Decker, also a portfolio holding, rose more than 9% in an earnings-driven rally that extended last week’s surge. We don’t know how long this rotation will last, but that’s what playing out right now. Banks shining : Lost in the shuffle of all the earnings earlier and another tech selloff was a bullish note on large-cap banks from Morgan Stanley analyst Betsy Graseck. We read Graseck carefully because of her previous big calls. Back in January, Graseck and her team upgraded their view on the large-cap banks to “attractive” and upgraded Citi , Goldman Sachs , and Bank of America to a buy-equivalent overweight. At the time, Morgan Stanley already had overweight ratings on Club name Wells Fargo and JPMorgan . It was a good call. Now, Graseck is back again raising price targets on nearly every bank in her coverage after second-quarter earnings. In her review of the quarter, she found that the capital markets rebound is only in its second inning, excess capital supports higher buybacks next year, and net interest income is starting to inflect for a handful of banks. Longer term, Grasck thinks the banks are skewing towards her “bull case” on lower expected credit losses. Up next: It’s a big night of earnings with Club names Microsoft , Advanced Micro Devices , and Starbucks scheduled to report. Some other names to watch are Arista Networks, Pinterest, First Solar, Caesars Entertainment, and Electronics Arts. Before Wednesday’s open, we get earnings from Club stocks GE Healthcare and DuPont . Boeing, Norwegian Cruise Line, Mastercard, Humana, Trane Technologies, and Kraft Heinz are also set to report. Club stock Meta Platforms is out with earnings after Wednesday’s close. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street.
CrowdStrike (CRWD) has experienced a staggering 40% decline from its highs in just 20 days. This dramatic drop highlights the significant impact of sentiment and emotions on a stock’s perceived value. Despite this decline, there’s nothing fundamentally wrong with CRWD as a company. It remains the market leader in cloud-based security and consistently beats earnings estimates quarter after quarter. This drop in such a short period seems overly exaggerated, and I’m on the lookout for signs of a bounce to initiate a bullish trade on CRWD. Also, it’s important to note that we are in the midst of earnings season, with major players like Microsoft (MSFT), Amazon (AMZN), Apple (AAPL), and Meta (META) reporting earnings this week. The Nasdaq is expected to see significant swings due to these earnings reports, and I firmly believe in the adage, “a rising tide lifts all boats.” Therefore, Nasdaq’s price movement will likely play a crucial role in determining whether we’ll see a recovery in CRWD anytime soon. Note that the Nasdaq is under pressure and has already seen a 10% correction, indicating a negative sentiment. This trade is based on the assumption that mega-cap stocks will beat earnings estimates and cause a reversal in the Nasdaq. In addition to this assumption, I am also using some technical indicators to spot an entry on CRWD: RSI (Relative Strength Index): When the RSI drops below 30, it indicates an oversold position on a stock or ETF. After this happens, traders need to wait for the RSI to pop above 30 to take a bullish stance. At the time of writing, the RSI is at 21. So, it is a waiting game for me to take this trade. DMI (Directional Movement Index): The DMI is composed of three lines: DI+ (green line), DI- (red line), and ADX (blue line). When the DI- (red line) is above the DI+ (green line), it indicates a downtrend. However, when the DI lines start changing direction, it indicates a possible change in the current trend. Note that both DI- and DI+ are changing direction, which provides the first indication of a possible trend change. However, waiting for the RSI to confirm is critical before going bullish on CRWD. The Trade To take a bullish trade on CRWD, I’m using a trade structure called a “bull call spread.” To construct my bull call spread, I need to buy a $230 call and sell a $235 call as a single unit. It’s important to note that if one waits for confirmation from the RSI, the price of CRWD will likely be higher. However, various spreads can be constructed based on CRWD’s price. For example, once the RSI goes above 30 and CRWD is trading at $250, one could consider a 250-255 call spread as well. Here is my exact trade setup: Bought $230 call, August 30th expiry Sold $235 call, August 30th expiry Cost: $250 Potential Profit: $250 If CRWD trades at or above $235 by the expiration date, this trade could yield a return of 100% on the amount risked. With 10 contracts, this equates to risking $2500 to potentially gain $2500 DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
