Global Head of Research, Economics and Strategy, Wells Fargo Securities
In recent years, the combination of algorithms and artificial intelligence has reached the forefront of investment strategy, but Diane Schumaker-Krieg isn’t ready to take human beings out of the equation.
Her team at Wells Fargo Securities developed an AI-powered tool that can examine relationships between company fundamentals, stock price movements and news stories. It is capable of consuming and analyzing 2,000 media articles an hour.
But an analyst’s gut instinct is still vital, Schumaker-Krieg said.
“Until machines can mimic consciousness, there will always be a large human element of research,” she said. “Predicting the success of a long-term business strategy is less about sentiment and more about assigning probability of success to initiatives that are tightly linked to decidedly human skills.”
An estimated 90% of trading is now done by algorithms, but Schumaker-Krieg, who has more than 30 years in research, argued that the bigger impact of technology is its influence on what humans think. It democratizes access to information and ushers in new ways of tackling problems.
The profile of the person occupying the sell-side analyst’s chair also has changed. Gone is the trader who would call dozens of contacts over the phone to offer up a single piece of information.
“In the old days, analysts could make a living as information gatekeepers,” Schumaker-Krieg said. “No more. The bar has been raised exponentially. Marginal players have been squeezed out, giving way to high impact analysts with superior insight, analytical skills and innovative technology.”
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The cultural divisions on Wall Street that defined the cliques of traders and programmers have also been altered, said Schumaker-Krieg. For those in the back office, algorithms have become step-ladders to the front.
“It is much more of a cerebral profession now,” she said.
Currently, her hottest recruitment search is for a data scientist, not the types of brash salesmen that populate “
Increasingly stringent regulatory regimes, such as the European Union’s MiFID II (which altered how firms could charge for analyst research) represent another disruptive force in her area.
These shifting dynamics mean all companies have to develop new means to create value and stay competitive — which is very much a problem for humans to solve, Schumaker-Krieg said.
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