Here are three of the week's top pieces of financial insight, gathered from around the web:
On Wall Street, AI still struggles
Surprisingly, in investing, AI still isn't close to beating the market, said Gregory Zuckerman in The Wall Street Journal. For all the strides made by artificial intelligence, which is now being tested in almost every industry, the computer's investing results "haven't been especially impressive." So-called quants "have built trading models that can extrapolate from past data to identify patterns and develop profitable trades." But they still require some human intervention. One reason is that market data is "noisier" than other inputs used to train AI. "Earnings, share momentum, investor sentiment, and other financial data only partly explain stock moves, and the rest is unaccountable 'noise.'" One more factor: Unlike the areas in which AI has succeeded, investing is "adversarial" — any mistake or predictable pattern will be seized on by rivals.
A great year for the IRS
Last year was a record-setting year for income tax payments, said Justin Fox in Bloomberg. "Americans paid out an estimated 14.7 percent of their personal income in 2022 in what the U.S. Bureau of Economic Analysis calls personal current taxes (mainly federal, state, and local income taxes), an all-time high." The main reason for this record-setting tax burden "is that asset prices rose so much," and people — particularly higher earners taxed at a higher rate — "sold them for big profits." For many others, there was "bracket creep." Inflation caused some incomes to get "bumped temporarily into higher brackets." The good news is that those tax brackets are adjusted for this year. If you're wondering: No, all those taxes didn't cut the deficit, because federal spending rose even more.
Choosing kids over savings
Many American parents are risking their retirement savings to help their adult children, said Megan Leonhardt in Fortune. A recent survey from Bankrate found that "nearly 7 in 10 parents (68 percent) who have any children age 18 or older have made at least one financial sacrifice to help out their kids." Over half of parents surveyed "say they've dipped into their emergency savings," while about 16 percent said they had "put off hitting their own financial milestones." To be fair, Millennials and Gen Zers faced the Great Recession and a global pandemic right at the points when their careers were just taking off. And one possible bit of relief: 6 in 10 Millennials (ages 27 to 42) now "feel good about their finances."
This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.
